NFLX Netflix Monthly Chart; Negative Divergence Developing

Netflix is a darling of investors. NFLX is traveling from the bottom left to the top right of the chart which is what a Netflix bull wants to see. Netflix, however, is printing its swan song. Perhaps Netflix can film a pay-per-view series of their coming demise as it unfolds. Last summer, the NFLX euphoria was at a peak. Their movies and shows, the original content, is popular, so investors trip over each other to buy the stock expecting the joy to continue forever.

A Tweezer Top prints last summer during the bull party phase (blue circle). The matching price high comes with negative divergence on the chart indicators (red lines) except for the MACD line that remains long and strong wanting another price high after any pull back in this monthly time frame. The red rising wedge pattern is bearish and the RSI, stochastics and money flow were overbot agreeable to a pull back.

Since the upper band was violated, the middle band (now at 292) was the initial downside target which was achieved. The 20-mnth MA has held as support the last few years. When it breaks, look out Nellie. Price then bounces off the 20 MA to begin the year with traders buying with both fists afraid of missing out on the Netflix upside bandwagon. Price recovers higher due to the remaining strength in the MACD.

Thus, price should want to keep floating higher to that brown line reflecting the prior highs; let's just call it 4 hundo. When that matching high in price occurs, the chart indicators will be in full-on neggie d wanting to see a serious spankdown. In fact, look at all the indicators. Even if price rockets higher it is hard to see the indicators taking out the prior highs so the neggie d should remain. Price needs to bump higher for the matching high and as long as the indicators then remain below those thin red lines in the margin, it is over for Netflix, or ovah, as they say in Brooklyn.

The purple box shows that NFLX finally moved above 50 to be in a STRONG trend higher late 2017, all of last year and into early this year. The ADX is dropping, however, and about to go sub 50 which would verify that the strong trend higher is over.

What does it all mean? It means you should walk to the exits at the Netflix movie house. NFLX can likely be shorted above 380 and simply build shorts from there forward. Price may run to 400 and higher as the last of the MACD bull juice is used-up; that would be great for confirming the universal negative divergence with the chart and locking in the doom scenario for the future. NFLX may also seek that upper standard deviation band at 432. It would likely depend if there is any positive news with Netflix. That is the only thing that could derail its fate and breathe more life into the aging beauty.

So NFLX is an all-out short play at 380 and higher going forward. NFLX will likely peak this week or in April and then it's over. Netflix would be expected to then travel sideways to sideways lower for the weeks, months, perhaps a few years forward. If you made a lot of money in NFLX, start implementing your exit strategy. Do not go long NFLX even though it may yet have life to 380-432 (red circle; this is where entering short is wiser). You would be picking up nickels in front of a bulldozer.

Keystone has NFLX on the short watch list but does not own a position now. At 380, it will be tempting to initiate a short position. With the above chart playing out as described, the 400 level and higher will be guaranteed short city. After Netflix tops-out in April, it will trail lower for the foreseeable future (unless a news event extends its life). 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.