Is Netflix a bit too hot to handle…or not? (January 29, 2013)
NFLX
I’m Dan Fitzpatrick at Stock and OptionMarketMentor.com on Tuesday, January 29th. In this video we’re going to look at Netflix ( $NFLX Netflix, Inc ). Look, this is a real dicey stock to trade, I mean if you’re trading this and you leave your screen or you just kind of decide this stock’s going to do one thing or another and you leave it alone your charts going to get pretty sporty real quick. Look, this stock, if we just looked at yesterday, okay this was a stock that needed to reverse, I mean you look at this, this stock gapped open, I’m sure I discussed this in last nights Strategy Session, and the stock closed down after this kind of move higher, a down close like this, this is a stock that’s going to really be working off some of this enthusiasm, okay? So what happens? Well today this stock gapped down and I’m going, “Okay, great!” Well we’re going to get a continuation here and then what happens? That was the morning gap down; before too long, these are five-minute bars, the bears felt like they needed to hit the bars, okay? Up here, what’s this? Basically an hour, a little less than an hour after the open the stock is up above where it was at the close. So this is a type of thing, when you see this it is absolutely not clear that you want to be shorting this stock; and I don’t like to look at stocks like this and say, “Okay, this is the top.” Now I will say this, I’m not buying up here, there’s no way I’m taking a long position on here because I think it is the top. Maybe were just getting some shorts that are still covering because there was, you know, significant short interest in this stock. There are a lot of bears on Netflix ( $NFLX Netflix, Inc ), so maybe that is why. But me saying I don’t want to take a long position is not the same as me saying the top is in, we’re going to short this stock; just not going to do that. What I would suggest is if you’re one of these, you know, gunslinger types, that is long this stock or you think the stock’s going to go higher, fine. Just use today’s intraday low of $156.63, use that as kind of a reference for your stops. If it drops below $156.00 or $155.00, which, by the way, that’s 14 points, okay. That’s a pretty significant decline. But if it drops below here you really do want to get out of that long position. I would be more inclined to short this than buy it, but just not right now, neither one right now, I need to see more trading activity. If the stock starts rolling over a bit then I would look to short this stock by perhaps buying puts or writing a bear call spread up here, something like that. But for now this is just one of those stocks, it’s a little too hot, a little too hot to handle. So I just wanted to mention that to you, because sometimes the best trade is the trade that you don’t take or the trade that you wait on, and so that’s really what I think is the case about Netflix ( $NFLX Netflix, Inc ). By the way, if you happen to be long from down here, no need to sell it, don’t sell it, ride the thing as far as you can until she bucks you off. Just make sure you’ve got a trailing stop on your position. Okay, members get over to the Strategy Session. That group that I told you that I probably wasn’t going to be covering too much for a while because we’d been pounding on it for too long. Well guess what? It’s still poundable so we’re going to go back to the well and stay in the stuff that’s working. Free Chart