Menu
Free After-Hours Analysis
Wednesday morning the S&P 500 continued Tuesday’s bounce off of 4,120 support, at least initially. Unfortunately, after erasing nearly all of the previous day’s decline in midday trade, the index retreated back to breakeven by the close.
This was definitely one of those half-full, half-empty kinds of days. Bulls are pointing to the stalled selloff and bears are gloating over the weak close.
In situations like this, the tie-breaker always goes with the trend. This is still very much a bull market and that means when everything is equal, the next move typically resolves to the upside.
Tuesday’s dip and bounce gave us a clear line in the sand. Remain above 4,120 support and the bounce is alive and well. Retreat back to support so soon after bouncing off of it and lower prices are ahead. Plan your next trade accordingly.
As expected, NFLX violated $500 support, giving us a nice short entry.
Stocks bounce from oversold levels quickly. Unfortunately, NFLX has been hovering near $500 for a few weeks now. That tells us this pullback following disappointing subscriber growth hasn’t reached oversold levels yet. Something that holds next to support for too long will inevitably violate that support. And that’s exactly what NFLX did today.
NFLX is now a short with a stop just above $500.
That said, trading against the trend is one of the most difficult ways to make money because it requires impeccable timing. This is a good short entry, but we need to remain nimble. Keep a nearby stop and be prepared to take profits quickly. NFLX is still a great company and this dip will bounce hard and fast once it reaches capitulation. Don’t get caught on the wrong side of that bounce.
If you find these posts useful, please return the favor by liking and sharing them!
Sign up for FREE Email Alerts to get profitable insights like these delivered to your inbox every evening.
What’s a good trade worth to you?
How about avoiding a loss?
For less than $1/day, receive actionable analysis and a trading plan every day during market hours
Follow Jani on Twitter @crackedmarket
Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.
You must be logged in to post a comment.