This is a WEEKLY chart. Each candle represents a week of price activity.
Have you noticed this pattern on the chart? You can see it on multiple time frames but I felt the weekly was the most attractive representation. In short, you have some horizontal resistance and some past support along an uptrend line.
Horizontal Resistance - NFLX went through the $385 level back in June of 2018 for the first time. About a month later it fell below that same $385 level. Since then, it has returned to the $385 level (and retreated) four separate times. The most recent time is currently happening. It has been a 4 week process so far. Lets watch and see what happens.
Uptrend Support - After touching the $385 level in October of 2018, NFLX dropped all the way down to about $230. After touching the $385 level in July of 2019, NFLX dropped down to about $250. Now that NFLX has rallied above the $385 level in 3 different weeks and closed all those weeks under the $385 resistance, could we see NFLX fall again? If so, do we have any idea where it might go? We might. Lets make an educated guess that NFLX may fall again and if it does it may fall back to the uptrend line. It is hard to say how long it will take or even if it will happen at all. But if it does. My target would be that it touches the uptrend line somewhere in the long shaded ellipse on the right side of the uptrend support line. Probably somewhere between $270 and $280. FYI - That is a $100 point drop from here... No matter how long it takes, I would not want to be long any name and take a $100 haircut unless I was somehow hedging the long position.
This is not a prediction. It is simply an educated guess about what "might" happen to NFLX if it can't get above, and stay above, the $385 resistance level.
Back to the Horizontal Resistance line - Resistance lines often turn into support lines. If NFLX can get above and stay above the $385 level, this resistance line will probably become support. If you are long, this is the scenario you are looking for.
If you are long NFLX like most people, you have to decide how to play it. Just be cognizant of the possibilities. I would be a little nervous if the price is below $385. But I would be a little more comfy when the price is above that level. I don't own NFLX so I can't even share my position and my plan with you.
I will say that if NFLX can create a weekly candle that has a lower high and a lower low than the previous candle or close the week below the body of last week's candle or create an outside candle this week, I will consider buying puts. Also, if NFLX drops below the blue line, I would probably add to my position. But if NFLX can maintain the current higher high and higher low candle and get back above the $385 level, I will consider buying calls.
NFLX is one of the charts on my main screen layout. I am watching it pretty closely. This chart is pretty intriguing to me. I am curious how it will turn out. And I will try to make some money on it no matter which way it goes. But since I am not currently involved, I get to wait until I am comfortable with a direction to try to follow.
Looking like a potential reversal weekly candle with the price action today...
TheTrendLineInvestor
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@httk, This week's candle missed being an outside candle by only six cents. Also the closing price of this week's candle (bottom of the candle body) is six cents below the top of last week's candle body.
It sure is interesting to watch the price action unfold. I strive to learn something or recognize something from every chart :)
shooterX
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Good Strategy
XolaniPhahla
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That's an awesome analysis 🔥.. What bugs me is that NFLX fundamentals are bullish, but on technical analysis anything can happen from here..
TheTrendLineInvestor
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@mbonenixolani4, Thank you for the compliment!
I always tell people I am not a fundamental trader/investor (fundy). When I was new I was a "fundy" and I always felt like I could not get the info fast enough to position myself to benefit. So out of frustration I left the fundy way of thinking behind became a technical investor (techy).
I will say that I have grown up a bit and realized that good investors think about both fundamentals and technicals. In the case of NFLX, if you are buying shares today and planning to hold for a while, your fundamental outlook is very valid. But if you are shorting shares or buying puts today because the market is going down, your technical outlook is valid until the market stops going down.
There is a difference between saying, "I bet this goes to zero" and saying, "I think this will continue to go down with the broader market so there will be a better (long term) entry down the road. Many people will call this way of thinking "timing". I call it "smarter investing". :)