NFLX Follow up

While were waiting for the market to digest the minutes, play a few games that typically happen after the minutes have been digested to set up positions in reaction to them, there's one asset that I have put a lot of faith in, that's credit and the HYG 15 min negative divegrence shown earlier is even worse now. I consider Credit and HYG in particular to be excellent leading indicators so as the market flops from exuberant to , "Hold on a second", HYG continues to deteriorate on a very serious time frame. I think I have time to get the NFLX follow up out real quick.

You may remember during April, NFLX was one of the most talked about long ideas here, a position was entered in both calls and long equity in the trading portfolio on April 1 Went with NFLX April (monthly) $355 & Equity long for Trading Portfolio however, there were numerous "Reiteration (Long)" posts, I'm guessing somewhere above 6.

I've been holding NFLX as a trading long position, probably far too long considering that particular portfolio is meant for trading, but today as I considered the atmosphere, the signals coming in on NFLX (I'm not ready to put out a short call here, but that is the end game), it made sense to clean this position up, take the small gain and create some dry powder for new positions.

First the P/L

At the fill of $383.50 with P/L came to + 6.26%

The charts...

 This shows where the call and trading portfolio long were entered April 1, during the rest of the month of April there were at least 6 long call reiterations (30 min).

You can probably see why I liked the chart so much in early to mid-April with leading positive divergences.

 This daily chart is a great example of the 4 stages and the look of each one, where the easy trending money is and where the trading gets much more dangerous.

Through 2012 NFLX was in a large, rounding stage 1 base with a leading positive divegrence, this doesn't look any different than some intraday bases that are several days long that we are watching now like GDX/NUGT as they too are in a rounding base. The take-away is that these positions are huge and they take a significant amount of time to put together. 

I recently listed a few positions from Appaloosa's Q1 10-F filing that included a $1.1bn SPY long position (this filing is over 45 days old when it was released so the positions back then are very likely not the same now), there was a "moderate" half a billion dollar long in GOOG. The point is, this is just 1 fund's holdings, the position sizes are huge and that's why a reversal , whether from a base or a top, is a process and not an event.

At #2 we have mark-up, this is the trending or easy money phase, there's very little chop. I created the Trend Channel which has won awards, specifically for the purpose of keeping you in the trend and taking you out before you reach stage 3 where trade can still be profitable, but it is much more dangerous as the market turns more lateral and volatility increases.

Stage 3 is "Distribution/top" and this is where trading is tougher compared to the ease of stage 2 or even stage 4 decline. If you didn't know the timeframe of 1-day on this chart or the time-scale below, you probably recognize these patterns as fractal, we see them on 15 min charts, 1 min intraday charts, etc. so the concept works in multiple timeframes and multiple asset types.

THE MAIN POINT IS THE LEADING NEGATIVE DAILY DIVEGRENCE IN PLACE RIGHT NOW, THAT MAKES NFLX A POSITION I WANT TO BE SHORT WHEN THE WALLS COME DOWN.

 Intraday 1 min, there were positive signals for the broad market Friday, therefore it shouldn't be surprising since the market is responsible for about 2/3rd the movement of any given stock that NFLX has a positive divegrence Friday, that has obviously changed a bit since. This is one of the reasons for closing NFLX long and creating some dry powder for new positions.

Since the positive divegrence was Friday, it's like a mini-cycle, the migration of the negative divegrence from the 1 min to the 2 min in leading negative position is something I take seriously, especially the further it migrates and with the highest probabilities being on the daily chart above.

The 5 min chart is seeing the same migration of the negative divergence from a small cycle that started last Friday.

And the 10 min chart is also in tow.

I don't have too many good reasons to stay long NFLX at this point as probabilities continue to build.

A short set up is a set up unto its own, just having negatives or probabilities is not enough, but I will be watching NFLX for the next entry.