Here’s your trade on Netflix ($NFLX) – October 18, 2022


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Netflix ( NASDAQ: NFLX ) just reported earnings a little bit ago and this is what is going on with the stock. Pretty big volume, over a million shares traded in a 5-minute span right after the company reported earnings, and so you can see we got a really nice volume spike.

But here’s the thing, first of all, just kind of a caveat just so you know I am not predicting anything. This thing could go either way tomorrow, it really could. It is really important that you understand that. Again, I have no edge but I do have a little bit of experience in seeing this kind of stuff for over the last 25 years, or so.

I can tell you this, moving averages matter. Once again I have got to say, I don’t know which way this is going to go. But let me just frame this for you, moving averages matter. This is the 200-day moving average, it has been drifting down, obviously, for quite a while.

This is what happens during base-building processes, the stock drifts sideways, as it has here, the stock drifts sideways and that allows, just by virtue of mathematics, it allows the 200-day moving average on a down slope, to finally catch up to the stock and that is really where we are now. I should say now the stock is coming up to hit the 200-day moving average while the 50-day moving average, finally, is flat.

We’ve got this little kind of convergence of indicators right here. And the only question, frankly, that should matter is, is this a sufficient base to allow the stock to move higher? We will find out over the next couple of days. And so why am I doing this video on this? When I say, I don’t know. I will tell you why. Because this 200-day moving average is a key, key, key indicator.

You ignore this at your own peril. I would expect this to come into play tomorrow. We could very well see the stock gap up above that and start trading even up to 300.00. And the reason is that there are people on the sidelines just waiting for a reason to buy anything with 4 letters in the ticker. They are really, really looking for something good to happen.

I haven’t even looked at the numbers here, as far as what they reported, and I really don’t care, and here’s why. Because I have no edge. I could say, Oh, they got 98 million subscribers in the last quarter. Well, what does that even mean? I don’t know. Oh, they only got 4 subscribers.

Well, what does that mean? I don’t know, I’m not an analyst but I know price action. And so this is telling me that as of right now this stock is breaking out of this base. It is breaking out of this base, which also means that this level needs to hold. So this is really stuck right between the top of this prior base, right here at about, we’ll say it’s 250.00. And the 200-day moving average is right down here, actually, I had drawn this quite a while ago just extending it down.

This is the current box if you are looking at the 200-day moving average as important. So the stock broke out of here, and now it’s into this box. But that means there is not that much overhead resistance before the stock hits the 50. I should say, there’s not that much room for it to go before the stock hits the 200-day moving average. And it has already gone quite a bit just to reach that point.

And so watch this level tomorrow. The 200-day moving average is at 283.00, that is truly going to be your line of demarcation on this stock. I would say the range right now would be anywhere from 250.00 up to 300.00, that is kind of the probable range. If it does get up to 300.00 you have got to be lightening up.

Be very cautious about this, do not short into this. When markets get all coiled up like this, everybody is looking for a reason to buy something, Oh, risk on, risk on, buy something. This would be one of those stocks that they are looking for.

And so we could get a lot of enthusiastic buying tomorrow and that could push the stock right up through the level that you stopped out at or that you shorted at and hit a wide stop and then you are screwed. So instead, let’s see how this stock trades up to 300.00. I’ve got to say it one more time, this is where your risk is.

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