NFLX Trade set Up

Looking at NFLX, my judgement tells me there's probably a little better entry, my gut tells me, "Who cares?" I really don't like the looks of this chart. NFLX did everything it had to do to form a great double top in the new technical analysis. Before everyone started using TA, a double top would see the second top typically fall just short of resistance from the first top, before Technical Analysis went mainstream. 

The emotional aspect of why these patterns acted like the way they did was very easy to understand and Technical Analysis had it right (emotionally) until it became so popular that Wall St. knew how traders would respond to each price pattern as they have been published in a large percentage of every T.A. book over the last century-literally. It's like Pavlov's Dog/Whistle, traders are so stuck in the dogma of all of these books that they don't see what's actually happening and how that dogma is being used against them.

In behavioral science, one explanation of  this is known as "Availability Cascade",

 a self-reinforcing process in which a collective belief gains more and more plausibility through its increasing repetition in public discourse (or "repeat something long enough and it will become true")

This is a classic Double top, they're usually pretty big, stretching over a year or more, but this very same concept holds true even if this were a 5 min chart or if you flipped it to its mirror opposite.

Buyers who got caught near the top as price started heading down or even those who have substantial profits tend to hold, there are a number of biases that could be cited, one might be the "hot-hand", which is the belief that a person who has experienced success has a greater chance of further success in additional attempts. We also tend to place more emphasis on good experiences than bad in our memories (just talk to someone who recently split from a significant other). The point is, they hold and as the stock loses more ground; they had a substantial run as a double top must procede an uptrend and they are loathe and slow to recognize a change because of past biases with the stock. They start to double down or figure there must be a bounce coming. In truth, the market has so much information that anyone can justify any belief they want by simply picking and choosing how to weight information which is clear bias, but that's what we do.

Many of the people holding at a loss tell themselves, "If I can just get back to break-even I'll sell", which is rooted in the Market maxim, "Do you want to be right or do you want to make money?" An example is taking a loss as one would by holding this stock as it heads down. Most people will hold this same stock they lost their money in rather than selling it at a loss and using the same proceeds to enter a better looking trade that has a higher potential for generating returns and this is because people don't want to be wrong which is based in our upbringing and experience in school which is a totally different subject, but suffice it to say that an 80% success rate in school is considered mediocre at best, in the market it's almost unbelievable and most people apply that bias of "success" to the market which is unrealistic.

In true supply/demand which is driven by emotions and that is what Technical Analysis originally was so good at identifying, as price rallies back up toward the former top, people who bought at lower prices than the ultimate top start selling. To make a long process shorter, by the time price is near resistance, most people have been through the emotional wringer and are willing to finally get out at a small loss which kept the stock from ever breaking through resistance .

Wall St. knows this, they also know that if the stock does break through resistance, it is viewed in a brand new light and is to be bought, this is where we need tools to determine whether it's a true breakout or an engineered one (head fake).

For NFLX...

 NFLX is a classic version of the new "Double Top", you very rarely see a textbook top anymore and especially not in a popular stock like NFLX with a lot of institutional activity.

Note the healthy volume which is expanding as price makes the first high, that is what volume is supposed to do, but near the top volume starts falling off and declining (yellow vertical line).

After the stage 4 decline phase there are two (as is common) capitulation events, this is when the majority of longs finally throw in the towel and sell en masse creating volume spikes and typically gaps down. There's almost always a second capitulation event after the first and below the first one's lows, then the process of a stage 1 base can begin again as there is substantial supply at cheap prices, typically overly cheap. 

Just as I said you could flip this price pattern to its mirror opposite as a double bottom, you see the second bottom in the base (which historically held above support) now breaks it as the base matures, the head fake move. 

Look at volume on the second run, it looks much different than the first and is not healthy.

 These are the 4 stages of a cycle in NFLX on a 5-day chart, note the current candlestick which is a bearish "Shooting Star" reversal candlestick just above former resistance.

This is the longer term 3C trend version showing the distribution of both tops, the accumulation of the bottom and how the second top is leading negative.

 This is a 60 min chart showing both longs buying a breakout as this is the resistance of the double top and their stops being hit just below that resistance where they always place them. I see or saw a possible triangle forming as I captured this chart, volume is correct for the price pattern. Since I captured this chart, the triangle has filled out more and it is a triangle, a small one.

 The 1 min 3C chart

The 10 min strongly suggests heavy distribution on the break above former resistance or the "Double top, most technical traders no longer view it as a double top, but a breakout. This is how and why Wall Street manipulates these patterns, it doesn't take much as they are already close on their own and it creates enormous demand they can sell or short in to as technical retail traders are buying the breakout as volume prove above on the 60 min chart.

This is the 4 hour chart of NFLX and you saw the multi day.

I'd say NFLX is a short here, but with that triangle and short term market probabilities, it's likely there's a slightly better entry on the upside, but I'd consider this as one of the better looking shorts for a core /trend position.