NFLX Follow Up

As many of you probably remember I have liked NFLX most of April for a long trade, from the Monday, April 28th NFLX Trade Idea Update

This is a chart from that post with its commentary...

"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."

While we didn't get the typical base or rounding process of a head fake move, we did get the head fake move as price broke $300 even with an intraday low of $299.50.

Also from the same post, "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."

As much as I might have liked the long trade in NFLX, the real prize is the short and I'll show some charts.

The next day, April 29th I posted, NFLX Follow Up... with this chart and commentary...

"10 min leading positive, this looks a lot like NFLX is getting ready to make an upside move and the charts above may be giving us near exact timing for that move."

The only thing I had expected that we didn't get was a wider foot print off the 4/28 lows, as far as the definition of a head fake though, the $299.50 low took out stops / orders at $300 and they put them right at the exact centennial number as we saw with AAPL yesterday at $600.

Now, looking forward...

This 30 min chart is probably as strong as the NFLX long trade got as far as timeframes. 

Lets see where it's moving to now as there are some interesting areas that could provide low risk, high probability entries and at better prices. I don't see anything right now that makes me want to take a NFLX long trade so I'm looking for the short set up.

 This 15 min chart shows the first accumulation area and run and the second which was the one that hit $300 stops in a single day with an intraday low of $299.50, but as mentioned before, we just saw all the volume exactly at $600 on AAPL, that's how powerful these whole numbers or centennial numbers are, the mind just gravitates to them.

There's an obvious negative divergence that's in place right now on this chart.

 The 10 min chart showing an in line uptrend to the far left, distribution at the February top and accumulation in to the April lows. This appears to be still leading positive and in position it is, but a closer look reveals...

A relative negative divergence and at the highest point on the open today, we move to a new leading negative low (there were earlier ones on the 1st and 2nd).

 There are a few interesting price patterns that traders will pick up on and that is how head fake moves are set up, one could be a rectangle range in the white horizontal trendlines, another could be a bullish Ascending Triangle which has the proper preceding price trend, the proper size and shape and the proper volume.

Either way you choose to draw the trendlines the break below both the bullish consolidation/continuation triangle or the bullish consolidation/continuation rectangle (rectangles, like symmetrical triangles have no directional bias like an Ascending bullish triangle, rather they depend on the preceding trend to define their bias ) which is bullish because the preceding trend in to the triangle was up.


I drew in a couple of scenarios, we'd need to see intraday charts like 1-3 min, maybe even 5 min go positive and a small reversal process at minimum although there was no reversal process on the break of $300, just formed a head for an inverse H&S bottom.

One scenario is a reversal pattern in which case 3C should tell us that there are positive divergences and that the reversal is probable and a move either back above the support line of the rectangle where shorts would put their stops, or above back in to the area of the Ascending Triangle.

The second scenario would be more extreme and thus more likely as the market tends to make more extreme moves, but that would be a false breakout (head fake move) above the resistance of the rectangle and triangle which is the same spot, about $346, but today's intraday high at $347.75 would also be an obvious and easy target.

These are the areas that we'd want to enter short positions, they let the trade come to us, reduce risk and while they move up to those areas, 3C should confirm strengthening distribution the entire time so probabilities would be higher and in the case of the scenario in which price breaks above the two resistance area, the head fake move would be a fantastic timing flag.

I'll tell you ahead of time, eve though it sounds like a reasonable plan, when price starts moving above those levels and to new highs for this trend off the lows of the 28th, suddenly it becomes emotionally difficult to pull the trigger on a short position as you are doing it in to higher and strong looking price action,  but that's why I try to anchor expectations ahead of time and let you know what some possibilities/probabilities are so when you see them you aren't put off and make an emotional decision rather than an evidence based one...

"Every fighter has a fight plan until the first punch is thrown".

 The 5 min chart showed a clear leading negative divergence at the opening highs today and just previous to that, then this leading negative divergence which is below the accumulation level of the 28th now.

 This was the 1 min chart of NFLX around 3 p.m., we see the clear leading negative at intraday highs today and a leading negative trend in 3C, however, near the close...

It's not much improvement, but for an hour it's a relative positive divergence which is what we'd expect to see as a start.

The 2 and 3 min charts didn't see the same kind of downside in 3C that the 1 min chart saw and they are left with relative positive divergences which increase the probabilities of the reversal move (starting at the 1 min and migrating out to longer ttimeframes as a reversal process in price forms) we would be looking for to enter this trade.

 2 min relative positive

3 min relative positive.

The idea here is if we get the set up that we anticipate, we enter the trade on our terms with probabilities and minimum risk, best pricing all on our side, if we don't get the set up or something is different, we just move on to the next trade or we adjust to new information as it comes in.

I don't like chasing assets and on a day like today many people are feeling that second most powerful market moving force, the emotion of greed, that's not a trade based on objective analysis, that's a trade based on emotion and there's rarely an edge there.

As the market maxim goes, "Bulls make money, bears make money, Pigs GET SLAUGHTERED".

THERE ARE MANY OTHER TRADES SO JUST LOOK FOR THE SET UP, I LIKE NFLX A LOT MORE AS A SHORT THAN I EVER DID AS A LONG, BUT THE SET UP HAS TO BE THERE.