NFLX Update

I'd say for my purposes 8 years or so ago, I'd have entered NFLX short with a wide stop as I prefer to give all new positions some extra room, especially if they are in a top or a bottom, however since then we've been able to fine tune things a bit more.

Yesterday NFLX popped up on the radar as a position that was just about ready and there were a few things I still wanted to see, thus this post from yesterday, NFLX Trade Set-up which isn't a trading idea, for immediate action, but a rough sketch of what we want to see for this to become a trade idea that is actionable. One of the things we were looking for yesterday was a return of NFLX to the $400 area, it's a strong psychological magnet and beyond that, it had been broken and as is the case with most support or strong psychological areas, there's typically a short period of loitering in the area just like we had talked about last week for USD/JPY after it broke two major support areas and it has been loitering in the area since then, although as you may have seen earlier today vs SPX futures, it looks like it's rolling over now and the Yen and $USDX futures support that probability, which isn't good news for the broad market, but even more specifically for individual assets like NFLX as they draft the market being it's the strongest directional force that influences them.

Later yesterday we started to get that move up toward the $400 area where I set multiple alerts, today we are clear above it and in the general area.

Here are a couple of charts with a bit more detail as to the bigger picture in NFLX as well as today's update.

 On a longer term daily NFLX chart, the proportions of a large primary cycle are nearly perfect from the base at Stage 1 and its rounding bottom (note these are the same stages and price patterns we see on 60 min charts, 5-day charts or 5 min charts. Stage 2 is the easy money stage, mark up, thus if you know where you are in the stages, you know what's coming next. 

Stage 3 looks like a H&S top of proportional size for the cycle that started in 2012. The approximate price pattern implied target is about $200, depending on how you draw the H&S top's neckline, it could be as low as $150 and these targets are more often than not, overshot just as the pendulum swings too far on the upside, it often swings too far on the downside, but this is a longer term target, not something I'd expect to see in a month.

With H&S tops, we would be at the top of the right shoulder which is the second place I'll short them, the top of the head being the first and favorite place and after a break below the neckline, a volatility shakeout that takes out all new shorts who came in on the break of the neckline being the 3rd and last place I'll short them so there are likely other opportunities in NFLX, but even a -75 -125 point move to break the neckline is a worthwhile trade or a longer term core/position trade entry.

 I added my custom cumulative volume indicator, you always want to confirm H&S tops and bottoms with volume. The rallies should see diminishing volume (red), the declines should see advancing volume (white) and that trend should be clear by the time the head is being formed and continue through the right shoulder as it has done so far.

 The daily chart shows the 3C divergences of the stages, accumulation at #1, in line at #2, distribution in to #3 and #4 is decline which would start to come off the top of the right shoulder and through the neckline. This is the easy money like stage 2 is the easy money, although stage 4 often occurs much faster than stage 22 making it extra fun and profitable to trade as fear is stronger than greed.

 The intermediate charts like this 10 min are negative and getting worse in to the top of the right shoulder.

The 15 min chart

The 30 min chart

And the main underlying trend, only eclipsed by the daily 3C chart above,

 The 4 hour chart giving excellent confirmation for a H&S top.

This is the 3 min chart from yesterday, you can see where we saw some light accumulation and this is why I set price alerts in the area above $400.

I'd like to see a little more damage in the 1-5 minute charts, but all in all this is still a decent looking area to consider starting to phase in to a position.