NFLX TRADE FOLLOW UP

Yesterday I featured NFLX as a long trade, this isn't much more than what most people would identify as an oversold bounce, I'd call it a counter trend shakeout.

In any case, you may recall the trade idea Trade Idea: NFLX Long and the charts that were posted just after, NFLX Charts

One of the keys to the trade that I mentioned and I even said that I thought you might use it as a qualifier, in other words if NFLX does "A"you might consider "B" as it would be coming to you, lowering your cost basis as well as risk and if the signals confirmed today, giving you an excellent timing marker.

This is from yesterday's NFLX idea...

" I would personally leave some room for a stop run/head fake in the area of about $349.90. In fact, if you want to place a high standard on the trade idea and get the best entry/lowest risk, you might consider setting an alert for <$349.90 and consider that the make or break for a long entry....the reason I mention a possible head fake is because it is already so close to support which would be a wider "W" base and they typically see a small stop run to give them some initial momentum as shorts will enter on a break of support and be caught in a bear trap and forced to cover as price reverses."

Wouldn't you know it...the < $349.90 doesn't mean right at $349.89, it means below that level as that's where the head fake would occur, how far it moves from there is a function of the market and that's why we always check head fake moves, even if they are very high probability, we can really only tell what the timing looks like by paying attention to what happens below that level which was a former support area.

Here's the charts for NFLX right now...

 This was the support area I mentioned yesterday and waiting for a break below that area, we want to see some volume so we know that there's supply, one of the reasons head fake moves are run as it's hard to accumulate a large position for institutional money without supply and whether it's a stop that's hit or a short that's entered, they both produce supply.

Supply is not enormous, but it's enough to have made the run worthwhile.

 What we also want to see is a reversal process as we know very few reversals are an event, so either a "W" or "U" shape which we may just be starting to see as price has stopped the ROC decline and started with some lateral movement, we need to see more of that.

As far as 3C on the move, it looks like the initial signal is supply was absorbed/accumulated, these divergences always start on the fastest chart (1 min) and "IF" the divergence is strong enough it will migrate to the longer charts showing us that it's a healthy divegrence of some increasing size.

 The 2 min chart is both confirming and migrating. If this were a serious break, I'd expect to see 3C confirm it by moving lower, that didn't happen.

Next we need to see the in line charts move to positive divergences...

 The 3 min is in line intraday which is good, this means if this chart goes positive we are seeing stronger accumulation as the migration spreads to the more serious timeframes.

 My standard for a trade is the 5 min chart being divergent, so the 3 min and then the 5 min (which wouldn't happen until we got more of a reversal process) would need to show positive divergences, that would be the key to timing an entry.

Of course one of the main reasons for considering a NFLX long which I'm already in , is the 30 min leading positive at a lateral range that looks like a reversal process to start a counter-trend rally/bounce, the head fake (if that is what we have and the 30 min chart puts the probabilities at high) is just a timing marker we see at least 80% of the time before a reversal making it an outstanding timing indication.

If you like the NFLX idea, I'd have this on your radar, I'm already in and fine with the position, if anything changes I'll let you know.