NFLX Update

I have a lot of stocks , ETFs, and other assets on my watch list as well as all of the market averages and different assets and indicators I go through every day, all day so I can't report on everything I see in each one, but I do try to bring them up in a timely manner if I think there's a decent chance that they'll be in our spot light son. NFLX is one I watch every day. I've had some expectations, which once you see, if you are familiar with most of our concepts, you'll understand why I had those expectations and why not chasing them was in my view, the correct path as the best trade in my opinion is not a trade of probabilities, but a trade of high probabilities, low risk and excellent timing. Anything parabolic in my opinion is not a trade of low risk unless you are catching the second half of a parabolic move, the reset. In any case, I suspect NFLX is going to be on our radar a lot more often and almost at any time now so I want to put the basic ground work of the charts out.

 a 5-day chart of NFLX with what looks like a Broadening top and a parabolic move above it, which if it fails, would be quite a momentum igniter to the downside. Failed moves make for fast reversals, in this case especially with some psychological magnets in the area and with a break back in to the broadening top formation.

A Broadening Top isn't any different than any other technical price pattern, it has been around a LONG time, it's easily recognizable and thus it is subject to the same kind of head faking price action  for the same reasons as a H&S top's specific head fake after the first break under the neckline.

Just above the Broadening top,  we have a parabolic break in NFLX, it's easier seen on a 5-day chart. This 1-day chart however shows an area at the yellow arrow where it looks like a massive churning event occurred and it hasn't traded much above that area since, at least not the intraday highs. The daily candle left a long upper wick, those are higher prices being rejected, but it's on huge volume and as such is a very bearish candle, a lot of shares are stuck up in that upper wick.

Churning is essentially smart money handing off shares to dumb money, price often sits there and churns on high volume with little progress as dumb money doesn't have the lifting power of smart money to move the asset, they just end up holding the new shares dumped by smart money and in this case the motivation for dumb money to take those shares was a new intraday high, the breakout chasers and now they are stuck.

I mentioned some expectations I had like a break above the tight range toward the middle of the chart, it was simply too tight, too obvious and too easy to take retail traders money like taking candy rom a child.

There's a similar zone right now that I'm watching as I think that could be a nice trigger for an entry, of course the broad market's tone will have a lot to do with what happens here. NFLX won't be able to buck the market for long when fear sets in as it did early last week.

 To know where you are going you have to know where you are. Looking at the price chart alone it's fairly easy to figure out where the different (4) stages of an asset's cycle are, but I'm cheating a bit and using the daily 3C chart just to confirm. The rounding bottom at #1 shows a positive leading divergence and on a daily chart no less, this is clearly a stage 1 base which is followed by stage 2 mark-up or rally, then a stage 3 top (the Broadening top) and the thing technical traders miss again and again , the thing that has been going on since Technical analysis took off with the advent of the internet and cheap online brokers sending scores of would be portfolio managers looking for an easy way to make investing/trading decisions, thus the great migration in to Technical Analysis, formerly mocked as Voodoo Analysis. With that came the predictability of Technical Analysis on a massive scale and Wall Street's use of that against traders. For example in NFLX, a Broadening top is thrown to the side with a break above it because Technical analysis teaches that the pattern is negated with a break above, Wall St. knows this, they also know that traders believe it 100% and will chase prices higher leading to churning days like the one I pointed out above.

The good news is the predictability of technical traders also leads to the predictability of how Wall Street will shaft them if you just pay attention to the market with your own insights rather than those dictated by books and mentors. It's all right there for you to see, just watch with an open mind.

As I had just said yesterday, the head fake move is seen in all assets and all timeframes whether an intraday chart, the start of a swing move or a weekly chart such as the one above, it is a fractal concept and therefore can be used by virtually any kind of trader to their advantage.

You also know that head fake moves are some of the best price-based timing signals for a reversal, of course a weekly chart's head fake move is not going to resolve on a 5 min chart, things must be proportional with fractal concepts. The divergence at the area labelled "HF" in yellow should stand out quite clearly.

 Recent activity in NFLX makes me think we are getting close to a trade here which is why I'm laying out the ground work and basics of NFLX so I don't need to do it if I'm in a hurry to get the idea out.

In any case, this 1 min chart has seen some sharp deterioration this week which is inline with the "week Ahead" forecast after we saw early week strength starting Monday, I'm thinking it's likely to start to transition, Greece or not (at least that's my thought, I'll let the market tell us with much higher probabilities and objective evidence).

 The weakness on intraday 1 min charts above has migrated to the 3 min chart. At this point the migration of the divergence doesn't serve as strategic planning, those divergences are already in place like the daily chart above, these fall in to tactical planning, looking for the specific entry.

 The weakness in the 3C chart of NFLX in the area has moved to a 5 min chart which may not sound like a big jump, but the difference between 1, 2 and 3 min charts and a 5 min chart is a huge divide.

 You can see that by seeing the same migration of the negative divergence on a chart as strong as a 15 min chart, so there has been a process under way.

I said there are some psychological levels and some technical levels, one such psychological level would be the area at which the Trend Channel breaks the parabolic move above the Broadening top and that is at a psychological magnet of $650, I'll be setting price alerts just below that level, but in looking for a short term head fake move that could lead to that reversal, remember the daily chart above and tight current range, that's in the $680 to $692 level on the upside which we might as well call $700 as that's the strongest psychological magnet on the upside, I'll have price alerts clear to that area, but the break below $650 is where it starts getting interesting and important.

On the downside, other important psychological magnets include $525, which is the top of the Broadening top's upper trend line, $500 which is a major psychological magnet and below the gap at $475 and well inside the Broadening Top. I'm not looking for an entry there, but those are areas I want to be aware of as something will happen in those areas just like last week's bounce off the SPX's 150-day moving average.

Keep NFLX on your radar, take a look at it with your tools, it's getting interesting.