Has NetFlix Topped Out?

We have had a very good run in the stock of Netflix (NASDAQ:NFLX) and the question now is, has Netflix topped out?

netflixThere is increasing evidence that Netflix is having problems over the $300-$310 area. With a lower close in this stock today, it will confirm that it has put in an intermediate top.

Yesterday, Netflix (NASDAQ:NFLX) put in a Japanese candlestick pattern known as "a dark cloud cover." This is confirmed as a top if the market closes lower today, September 17th. Candlestick patterns can be very powerful. This is not to say that Netflix has put in an all-time top, but rather in the interim the market has stopped going up and is probably going to see a pullback.

Pullbacks are always interesting and I like to use our Fibonacci retracement tool to measure them. In 2013, most of the pullbacks were in $30-$40 range. Measuring from the recent high of $314.18 on September 11th and subtracting $40, takes us down to $274 area. Coincidentally this is very close to a 50% Fibonacci retracement if we measure from the recent high on September 11th to the low seen on July 25th at $239.91.

I have two other concerns with Netflix (NASDAQ:NFLX). We are at a cyclic high and the MACD is beginning to roll over, which is similar to what happened in the May and July periods.

Please be aware I am not recommending shorting Netflix, as the longer-term trend for Netflix remains positive and I can see this market doing well longer term as it dominates the space of streaming video and home entertainment.

Let's watch today's close in Netflix very carefully. A close below the $301.13 level will represent a new 5-day low close for this stock.

This is just a heads up that Netflix may be running into some headwinds and profit taking.

Please feel free to leave a comment or your own view on the stock.

Have a great trading day,
Adam Hewison
President, INO.com
Co-Creator, MarketClub

6 thoughts on “Has NetFlix Topped Out?

  1. Excellent overall analysis on NFLX. A couple of things jump out at me. First the "dark cloud cover". I agree that it sure looks like that, but I try not to let those formations influence me too much, as I've seen them fail far too often.

    Second regarding the close. I am not familiar with your exit strategy as I am new to visiting the site. When I look at NFLX it has not closed below the low of the last three days, which is one stop I've used. I do not see any bearish divergence either. As you mention, selling short is not even close to being an option. The stock needs to tell you it's rolling over before that is a consideration. Amazing run.

  2. Very impressive technical analysis. I never heard of a "dark cloud cover" before. In any event, on the fundamentals NFLX is tremendously overvalued and everyone knows it. Its like 1999 all over again. I would never BUY any NFLX as an investment due to its valuation, however its clearly a very viable business and leader in the "video streaming" space. I actually tried to short it the other day but was told there are just not any shares available. Due to its substantial SHORT interest, it is probably best to just stay away from NFLX. However, when word gets out that Carl Icahn is SELLING, watch how fast and furious this stock dives.

  3. Absolutely correct as usuall. Apart from retracement what about those gaps?

    No doubt success with popular movie series how much gap higher openings can the upcoming season into

    2014 bring after this re tracement??????

    Buy now and buy more below 260?

    I own them at 50$ and wish wish wish wish I had more!

    1. Sil,

      Thanks for your feedback. Nice going with NetFlix.

      We may or may not see a pullback in NetFlix. However, NetFlix is the brand and company to beat in the online streaming home entertainments space.

      Once again thank you for participating in the conversation.

      All the best,

      Adam Hewison
      President, INO.com
      Co-Founder of MarketClub.com

      1. Hi Adam,

        Thanks for all of your great analysis. In the case of NFLX, wouldn't you just let the Trade Triangles keep you in or take you out at the appropriate weekly level if NFLX was to pull back say to the $298.93 price next week or to $290.28 the week after? Or is it prudent to take money off the table sooner?

        Thanks again, keep up the good work. I really appreciate your knowledge and the gift of teaching that you have enabling us to better understand the markets and individual stocks.


        1. Marc,

          Thank you for your kind words.

          One way you might want to consider is taking a percentage of your winnings off the table. Thank way you are playing with house money.

          Of course the Trade Triangle is a tried and true method which you should employ if in fact NetFlix retraces back to the numbers we show in the chart.

          Sometimes the hardest thing to do is just hold onto a winning position.

          Thanks for taking the time out of your day to contribute your view point and comments.


          Adam Hewison
          President, INO.com
          Co-Founder of MarketClub.com

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