Whenever an asset grows at an exponential rate, that is a red flag that a major correction is imminent. Netflix has seen unbelievable growth (along with the other FAANG's) in the past year, and signs are now showing that correction time has begun. Last week, Netflix reported earnings and user expansion slightly lower than the sky high expectations 'analysts' had created for their quarterly report, and the stock fell over 14%. That is a very bad sign. Yes, it recovered extremely strong the next trading day, but fell back to the original 14% decline in the days following.
The chart also shows signs that a correction is in store. Bearish divergence, even before the earnings report, showed weakening strength as the RSI fell and the price double topped around the $420 region. MACD has crossed over issuing a 'sell' signal, and is extremely high, increasing the possibility for a big tumble.
This is a weekly chart of Netflix, which gives the broader outlook for the coming months. There is a possibility Netflix rallies back towards the $400 region in the short term, but I highly doubt it will make a new high in the coming weeks.
Exponential rallies always end poorly, as they show growth is unsustainable at that rate.
Comment
⋅
This trade is working out very nicely. A close below key support in the 329 region this week could blow this pen even more, especially if the SPY continues its downtrend.
what is your TP on the way down? I see 330s like next support...
pstowe
⋅
@pmcllc, I will be taking profit all the way down, but will hold at least half of my position until January (until further notice) unless it tanks really quick. Today was a great day, and it seems as sentiment around tech is slowly shifting away from the extremely bullish view. If apple bricks earnings tomorrow, tech will probably continue to drag down the entire market for the rest of the week, which will be very nice for NFLX puts.
matejvendo
⋅
@pstowe, Hi , what do you think now, can it go again up ??? I hope end of month 377 ? does it have some change ???
matejvendo
⋅
@pmcllc, hi whats is your new support for today ??? thanks
pstowe
⋅
@matejvendo, there is support in the 329-330 region, but with the market down I would not be long anything today. If 329 area doesn't hold, I would look to the 323 area.