Our patience in the NFLX Trade-Set-up paid off.
On January 21st, after NFLX earnings I posted,
NFLX trade Set-Up which was not a NFLX short call, but rather a set-up and looking for the entry for a NFLX short as the earnings in NFLX were headline garbage if anyone had bothered to read, would have known, but as we were talking about a lot that month, the cycle for NFLX to move higher to fill a massive gap was already in place and NFLX was going up no matter what earnings were, but that's only short term manipulation, the earnings (if you looked beyond the headline print) were horrible and that's what smart money is looking at, not what they did, but what they'll do.
So this is what the daily chart and our moves have looked like.
The trade set-up was the day after earning on the gap up,
but the actual entry which we were VERY patient with just so happened to be at the very top of NFLX's run posted on Thursday Feb. 26th at the red area, Trade Idea: NFLX Short
Since, NFLX has lost over 8% and our short has some nice breathing room to work on a longer term basis as we already have 2 previous NFLX core/trend shorts, one of which is back at a +7% gain after the massive earnings bounce and the other not too bad at a -7% loss, but moving back toward profitability each day. The last entry was as good as you can ask for at the very top of the post-earnings move.
Today's word that HBO is using AAPL as their exclusive stand-alone partner for their launch leaves NFLX out in the cold, so it looks like our latest trade set-up in NFLX was worth the patience.
As for the charts...
On the daily 3C NFLX chart we could clearly see the staging of the primary trend cycle with a rounding bottom and 3C accumulation in 2012, Stage 1 BASE/Accumulation leading to stage 2 Mark-Up/Participation through 2013 , but by 2014 distribution on a large scale (to show up on a daily chart) made it clear we were seeing stage 3 Top/Distribution with new leading negative 3C divergences. In 2014 you can see a large gap down at the first yellow arrow. Our entire premise for the latest trade was that middle man (specialist/market maker as well as fund managers) were stuck with inventory at much higher levels and significant losses which they'd try to get out of, thus as we see the pre-earnings 3C charts, you can see NFLX was going up No matter what the earnings as price reacts faster than you can read an earnings report and sets the tone or perception of how earnings were received even if as usual, price is exceptionally deceptive. The second yellow arrow was the gap fill and chance for pros holding inventory at those levels to exit it without taking huge losses, but all the while the 3C charts never saw any improvement, just more deterioration suggesting what we initially though post earnings, that they'd be looking to get out as soon as they feasibly could without taking heavy losses as price filled the gap and then some creating the demand and volume large institutional traders need to exit positions without crashing price.
This 2 hour 3C chart shows the accumulation pre-earnings that was going to set the perception or tone of earnings no matter what they were, tradrs chase price, they don't seem to care about anything else so even if surprised by NFLX's poor earnings past the headline print, they assume price is telling them the market took earnings differently (positive) when the entire time NFLX was set to ramp no matter what the earnings, this was key to our initial trade set up and look out for the right area. You can also see the huge leading negative divegrence and as we expected, the pros who had been trapped at huge lossed were not getting out at break even or better,
but they were getting out as we anticipated the first day of the gap up.
The 60min chart showed us the area where distribution was the strongest, from here it was just looking for the tactical timing which we got to the very day (highest intraday and closing move in which we entered the NFLX short.
3C has made a series of lower lows and highs to new leading negative lows since the top-looking lateral area had built in.
The 30 min chart shows the pre-earning's set up for a move higher at stage 1 base/accumulation which was a tell-tale and common "W" price pattern. At #3 we were in a top/distribution stage already with an intense 3C leading divergence in to the highs which we patiently waited on for all of the charts to align.
As for timing periods, the 3 min chart shows a clear deterioration in to the lateral top area, that was our cue along with numerous other multiple timeframe analysis/charts.
We hit this one PERFECTLY.
As for our custom buy/sell indicator, you can see the multiple sell signals and one buy, the size of the last signal was part of our analysis, but just one of many pieces.
I suspect now that the middle men have exited losing positions, NFLX will continue along the trend of the daily 3C chart as well as others and soon be hitting new lows.
This has been and continues to be a core short for us.
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