NFLX Update

The NFLX July (standard) $465 Puts opened last Tuesday July 1st, Opening NFLX July $645 Puts Now, are in the green.

Although intraday the IWM divergence is falling apart a bit (remember, the R2K futures were only positive intraday, the 5 min chart never went positive and remains in line with price) and that makes a NFLX bounce less likely, there is a 2 min positive in NFLX, this IS NOT a trade I would take, but if it led to a bounce, IT IS A BOUNCE I'D USE TO ENTER OR ADD TO NFLX (SHORT).

NFLX is one of several stocks expected to bounce a little over a week ago, AAPL was also on the list.

The bounce has kind of ruined the nice H&S price pattern it had in place, which isn't a big deal, it's the psychology that creates the pattern. Note how similar NFLX (now looking more like  a right angle Broadening Top) is to the IWM.

 IWM in green, NFLX in red. As I often say, the market is the strongest directional force on any given stock on any given day, probably around 2/3rds of a stocks's movement is due to the broad market, therefore you should start with market analysis and then pick your stock, not the other way around as is commonly the case.

Whatever kind of top formation you want to interpret NFLX as, this 4 hour chart shows the primary underlying money flow trend which has been distribution through the area as it was confirmation just prior to the top/lateral formation.

 This is the suspected head fake move as there was a clear resistance area (therefore stops and limits on the books are easy and profitable for Wall St. to hit as well as head fake moves creating momentum, "From a failed move comes a fast move").

Obviously the candlestick pattern in yellow where the head fake move would be is not looking good for NFLX as we are seeing a bearish engulfing candle today on rising volume.

This is really the only positive divegrence I have in NFLX, a 2 min chart and a small "W" base area, as you know, unless the divergence reaches at least the 5 min chart, I rarely trade something like this, but rather try to find a way to use a bounce to my advantage such as adding a put position on any bounce as the bounce has very weak 3C support.

 The trend of the 1 min chart in the area of the head fake move is part of what tells us it is a head fake move under distribution rather than confirmation.

The 5 min chart tells us the same.

And the 10 min chart is more trend, less detail, this tells us there's a leading negative divegrence at the head fake area, that's how we confirm a head fake move, although the higher probability charts will give us a good idea before we even have confirmation.

Such as the 15 min chart as it builds the area of what wa a right shoulder, it goes from confirmation to a divergence to a leading negative divergence at a new 3C low at the head fake area and this keeps going through 60 min and 4 hour charts. Thus if there's any bounce in NFLX, I'd be looking to start/add a position in to price strength/underlying weakness. I'll be setting price alerts just in case.

I'll also have a market update as that will likely be the determining factor as to what happens with any of these ideas. I'm keeping the full size NFLX equity short in place and for now, the NFLX July $465 puts we opened last week.