Netflix (NFLX)) — buy higher…sell even higher. (June 10, 2015)
In this video I want to look at Netflix ( NASDAQ:NFLX ). Yesterday the stock was up pretty big, it wasn’t a rumor it was actually just like anticipation of something that a lot of people knew was going to happen. That was that the board of directors was going to get authorization from the shareholders to authorize a whole boatload of shares and then ultimately split it’s stock. Kind of tough to buy for a lot of people; stock at 671.00, what are you going to get, 10.00? So they’ll split that stock.
So today there was more buzz on that. The stock gaps up and it just kept going. Here’s the thing, I know people in our forums, in “Stock Market Mentor and on Option Market Mentor,” were on top of this. But let me show you what happened and I’ll tell you why I think you’re next buy point is actually higher rather than lower. The stock went as high as, we’ll call it 693.00. Here’s how it looked intraday, plenty of time to get in this first thing in the morning. It gapped up some but it just kept going, almost till eleven o’clock then it rolls over.
By the way, this volume here, this is important for you to know, this volume here was really, really high volume, right? Not as high as this though. So when you get a big spike in volume but it’s less than the one before, even though the price was higher, that’s a red flag. Now when this one comes up, these are 5-minute bars and this spike is lower still. That tells you that the buying, the aggressiveness of buyers at this level, is kind of not what it used to be back here.
So then the stock tapers off through the end of the day and closes here. This is the after hours stuff and nobody really cares about that. If you’re trading after hours I’ll ask you some questions, one is a real easy one. Are you making money? Answer, no, you’re just a trading junky so stop doing it, you’ll be the only one. So listen, on an intraday basis on the 5-minute chart this thing has still kept going lower.
Now fundamentally I want you to think about this, retail investors will get all lathered up about the splitting of a stock. Can you imagine if Priceline ( NASDAQ:PCLN ) ever splits their stock? OMG that will be awesome! We don’t have to pay $1200.00 a share anymore; we can pay $12.00, or $120.00 or something. That’s what happens when these high price names split, but fundamentally it doesn’t matter.
The reason I’m saying that is, because money managers, you know large traders, they don’t get sucked into this stuff. This is the kind of stuff that is ultimately prompted by guys like you and me. I consider myself a retail guy, I’m proud of it. So anyway, the bottom line is nothing has changed fundamentally so we just have to look at this thing technically and say, “Okay, Wow! This is pretty extended.” Since this breakout here it’s never really built a great base.
Great meaning sufficiently long for lets say a 50-day moving average to come up here, or something to where the stock drifts over to it and bounces up again. Instead, there is no base; it’s just kind of a sideways drift for a while, then this lazy meandering thing up here. So it’s been a really, really sloppy chart and that’s why I say you want to wait for a moment of clarity. If the stock pulls back go ahead and buy it then too. But what’s that telling you?
What it’s telling you is that the idea of buying the stock before a stock split, that deal is yesterday’s news so you don’t need to do that. You’re going to have plenty of time to get in. If the stock pulls back don’t buy it, sit there and watch it, wait. On the other hand, and Randy Travis has taught us that there’s always another hand where there’s a golden band. If the stock starts moving to a new high, then it’s all blue-sky baby; nobody but winners in this stock and everybody likes a winner.
You’ll see more trading pile into this. So this is one of those things where you truly do, at least in my view, you want to buy higher rather than lower. I’d love to buy this stock at 630.00, 610.00, 590.00, or 570.00, whatever. But if I’m able to do that I don’t have to do it in a hurry, because there will be plenty of time for the stock to grind around. So would say this is only a buy right now if it is trading on momentum, and you will know that because the stock will start trading to new highs.
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