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Is NFLX Consolidating? Reversing? Or About To Make New Highs?

NFLX has been a great trader over the last few years, rallying from $60 to $300 only to fall back to $60 again, before ultimately making up all of those losses and reclaiming the $300 level. NFLX is a hotly contested stock, everyone is always trying to time the top and just as many are trying to buy in before it makes a new high. Classic momentum trade here where the bears need momentum to stall and the bulls need it to continue. With NFLX falling 4 out of the last 5 days for the first time since July, I thought now was a great time to check up on things and see where NFLX might go from here.

Before getting to my analysis, NFLX presents a very simple trade set up here and that’s why I am watching it, that is over/under 300. Using over/under is a great way to start your trade outlook. In the case of NFLX, holding over 300 targets upside, holding under 300 targets downside. On the resistance side NFLX has been struggling to stay above $305 with consistency since losing that level last Thursday. On the support side, NFLX hasn’t yet lost $300 with much conviction, closing above lows in the high $290′s in 3 of the last 4 days.

Now, time for some analysis….

NFLX is down 2 days in a row going into Wednesday. A 3rd down day in a row tomorrow that doesn’t close below the previous days low (so Tuesday low $297.70), hints at a bottom being formed. You can see examples of this on 7/30, 6/24, 5/7, 3/25

A 3rd down day in a row tomorrow where NFLX does close below the previous days low (so close below $297.70), hints at more selling pressure in the days ahead. You can see examples of this on 7/22, 5/23, 4/4

What about if NFLX posts a green day tomorrow, snapping the 2 day losing streak?

A green day that closes above the previous days high (so Tuesday high $303.26) hints at more upside momentum in the days ahead. You can see examples of this on 8/23, 7/5

A green day that doesn’t close above the previous days high hints at forthcoming consolidation/choppiness. You can see examples of this on 9/13, 6/7, 4/26, 3/18, 2/26

Here is how I put it for WHT members, in simpler terms as it appeared on my watch list:

NFLX ($299.55): over/under 300 set up — 306-310 in play on the over with res @ 303.26, 304.50, 306.45, 308.30/295-290 in play on the under with sup @ 297.50, and 296.81.

A 3rd down day in a row that doesn’t close below the previous days low (297.70) hints at a bottom being formed where a close below the previous day on a 3rd down day in a row hints at more downside pressure in the days ahead. A green day that snaps 2 day losing streak and closes above previous days high hints at more upside pressure in the days ahead.
-Watchhimtrade.com Watchlist For 9/18/13

I don’t know, is NFLX is just consolidating here, on the verge of a sharp reversal, or just resting before more momentum shows up? What I do know is that if I identify ways to potentially recognize the answer that reveals which scenario NFLX is/about to/will experience, I will be better prepared to trade the price action that presents itself.

To view my full watch list consisting of AAPL, GOOG, TSLA, CRM, AMZN, PCLN, SPY, GLD, click here.

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