Why Wednesday’s price action was bullish, plus what the next 12 months in NFLX will look like

By Jani Ziedins | End of Day Analysis

Apr 20

Free After-Hours Analysis: 

The S&P 500 finished Wednesday almost exactly where it started.

While flat is not as much fun as up, hanging on to all of Tuesday’s gains was a nice win for bulls.

As I’ve been saying since this latest test of 4,400 support started, real bounces take off and don’t look back. Last week’s failed bounces unwound their gains within hours. While Wednesday’s 24 hours of price stability isn’t enough to hang our hats on just yet, it is already doing better than last week’s fizzles.

As I wrote back on March 29th when the index hit multi-month highs:

Now that we’re at the highest point since the 2022 correction started and within 200 points of all-time highs, we should expect the rate of gains to stall, if not outright retrench in a very normal and healthy step-back. Retesting 4,400 wouldn’t be a surprise. 

And wouldn’t you know it, here we are testing 4,400 several weeks later. Funny how that works.

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But rather than freak out and predict a much larger selloff like everyone else, to me, this looks like the “very normal and healthy step-back” I anticipated back in March.

Rather than freak out alongside the crowd, we should be buying these discounts fearful sellers are so graciously giving away.

I have no idea if this is the real bounce or not. But I do know Tuesday’s buys are sitting on a pile of profits and my stops are already above my entry points, making this a free trade. If I’m right, I make a pile of money. If I’m wrong, I get out near my entry points, no harm no foul. Boy do I love it when trades work out like this.

At this point, there is nothing for me to do other than keep holding and moving up my trailing stops. And if I get stopped out, no big deal, I collect some small profits and try again next time. Being “wrong” doesn’t get any better than that.

I could write a book about what’s going on with NFLX, but the Cliff Note’s version is it is setting up for a very tradable dead-cat bounce over the near-term before resuming the long-established down-trend.

Swing traders can buy the next bounce for a quick profit.

Anyone still holding NFLX needs to be looking for an exit because as bad as this looks, it is going to get even worse over the medium-term. Use any bounces as an opportunity to get out.

And for the most aggressive traders, shorting the dead-cat bounce is probably the best trade going here.

As for what comes next, expect a saw-tooth decline with plenty of fool’s bounces on our way down to $140ish over the next six months. From there, expect this to turn into dead money for the next six months as people give up and forget about this stock. And then, and only then, will this finally become buyable for a longer-term hold.

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About the Author

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.