Tuesday, September 9, 2014

NFLX Netflix Weekly Chart Overbot Rising Wedge Negative Divergence

RBC Capital Markets analyst Mark Mahaney says buy Netlfix with a 600 price target. The chart is telling you to run from this stock not to it. It is a nasty chart set up with overbot stochastics, a wicked red rising wedge, and negative divergence across all indicators. Keystone called the prior spankdown in July, however, the histogram and money flow remains strong so you knew that price wanted to come up for another look at those highs after the spankdown, which it did.

Note the MACD line remains long and strong in the shorter term so there is maybe 1 to 3 more of sideways to up remaining and then the path down should quickly appear. The large short interest may create a big short-covering rally but those events are more prone to occur when a stock is already being beaten down and there may be weak short hands at play. Many of the shorts in Netflix will likely stay on moving forward. Today is a big +1.4% pop so some shorts threw in the towel to create these new record highs.

If you enjoyed big profits from the run simply exit and move on to other ideas. If not in NFLX, a long position is not attractive. Playing NFLX on the short side is more attractive but for a momo and news-driven stock like Netflix it is a dangerous play. Since the MACD is long and strong in the short term, NFLX can probably be viewed as a short play that can be started over the next 1 to 3 weeks with lower prices expected for the weeks and months ahead. A purple H&S pattern may form into 2015; it will need a drop towards the neckline then a recovery to build a right shoulder and then eventual failure at 325 (which would target 150), however, that is a long way off; a year or two. Take things one step at a time and assess the chart as the weeks move forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 7:04 AM:  NFLX prints an all-time high today at 489.29 and then drops to close down on the day at 479.01. The 20-day MA is 470.70 and rising so a reasonable expectation is for price to take a look at 470-472 for a bounce or die decision.

Note Added 7:05 PM on 9/10/14: Suntrust upgrades Netflix with a price target of 525. NFLX is at 484.

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