So Jim wants to know if Netflix “look like a good short or put candidate here.” This is a tough call for me. It would be much easier for me to call it a short if the 50-day moving average and the lower Bollinger Band weren’t so close by. In fact, the stock bounced off of both of those levels yesterday. On the other hand it’s broken what’s been its trendline for most of the year. It broke that uptrend while making what’s supposedly a reliable continuation pattern, the falling three methods. (Actually, it wasn’t exactly a falling three methods but it’s close enough for government work.)
Personally, I don’t like entering shorts right after a breakdown because of the potential for a snap-back. In this case I’d rather watch for a bounce toward that blue downward sloping trendline and short it near there if it started showing signs of weakness. That would allow me to place a tight stop just above the trendline. Of course it could just crash & burn from here without a bounce but I just don’t like the risk/reward of that scenario. But folks who are comfortable playing breakouts & breakdowns would probably short it right here.
P.S. If it did crash straight through the 50 DMA I’d look to short it on a retracement to that moving average and place a stop loss just above the 50 DMA. I just can’t see shorting it 52 cents above its 50-day moving average though.
P.P.S. If you go by Herb Greenberg’s take on NetFlix, it’s a screaming short. (Note that Herb is often right but his timing isn’t so great.)
Mike, I take it this is not technically a new falling three methods as the three up days just got above the prior drop.
Now after another two days, we really might be setup for a real one.
We shall have to see which way she blows between your downtrend line and the 50 DMA.
yep, that’s why it wasn’t a falling 3 methods.
I agree it’s looking much more shortable after these 2 rather weak up days but as you suggest, I’d just play the break in either direction.