NFLX Trade Idea Update

Last Wednesday I posted this NFLX update, NFLX looks likely to put in a move to the upside soon with the following excerpt...


"...NFLX has been one that I have liked for an upside move most of the month.

I personally will wait for stronger confirmation before making any moves, things feel just choppy and transient, maybe noisy would be the best word, but noisy for a reason, not just random noise."

Looking at the NFLX charts today I think I understand what it was that was holding me back from taking a long position in NFLX and what to look for from here. We have a lot on the docket this week (Today excluded), you can get a look here. The point is the volatility that comes with all of this, especially the F_O_M_C knee jerk reaction, is likely where we are going to find out opportunity in NFLX for a long trade that should have massive relative strength vs the market, it looks like a real move that doesn't need any leverage.

 First off, the 5-day chart to give us some idea of where we are in the primary cycle, stage 3, but that doesn't mean NFLX can't put in a strong counter-trend move as it just breaks to stage 4, in fact, that's the highest probability.

This is NFLX taking out April 15th support today, this would be a probable head fake move, I'll show you why in a moment, but this is why the charts weren't looking quite right for a long entry. Short term charts weren't looking right, they were more than likely waiting to accumulate on a head fake move and that would be starting today or at least wouldn't start until stops were hit by breaching the April 15th support where stops would likely be lined up as well as shorts, that's a lot of supply.

 What I'd be looking for from here is that accumulation process of that supply and that should take the form of lateral price movement from this steady move down, maybe a rounding bottom or a "W".

Don't get me wrong, I'm still a huge NFLX core short fan and would open or add to a NFLX trend short on price strength, but that's a different/longer term trade.

 This 60 min chart shows distribution at the highs and the resulting decline, we also see a positive divegrence way out here on a 60 min chart as NFLX breaks support like a typical "W" or double bottom (not what you see in textbooks, but what you see in reality every day).

 Sorry to skip around on you, but at 10 mins we have the positive that reaches from here to the 60 min chart, thus the reason I've liked the idea of NFLX long for a good part of the month, but haven't acted on it as some other charts were not lined up for a long entry. The assumption that there was more noise or it just hadn't got there yet is giving way now to what is a clear, typical head fake set up today so now we have a pretty decent idea of what to look for from here on out for a long position trade entry.

This is the 30 min chart's positive as well, these longer timeframe charts have looked good, it has been the short timeframes that have been keeping me sitting on my hands with NFLX in particular.

This is a 5 min chart, the 1-3 min charts look the same, they wouldn't accumulate or show that kind of near term action telling us we are close to an entry until a supply area was reached as it was just broken through today.

What we need to see from here is the target range in which they'll accumulate. The price chart will start to lose downside ROC, there may be a final flush of stops and a steep drop before that happens, but NFLX "should" start moving to the side/laterally and forming something like a rounding bottom or a "W" pattern AND THAT'S WHERE THE 1-5 MIN CHARTS SHOULD START MOVING UP (3C) and that's where we'll likely find out NFLX long trade entry.

I will tell you now that I'll be one of the first to short NFLX on a bounce or add to a core short, but I also think the bounce trade in NFLX will be well worthwhile and likely have much better relative performance than the market as well as most sectors.

I'll keep updating NFLX as the situation starts to turn which I feel confident it will based on 10-60 min charts.