This is a one month chart looking at volume by price support. The largest volume/price range was tested numerous times, $105 per share. This level thus can be considered solid support allowing upside calculations.
Stocks typically move in these intervals: Base x 1.15%, 1.25% and 1.40%. Currently, NFLX has moved 1.15% from base. It is a 1/3 probability that this move, from the base, is now completed; leaving open the resumption of the downtrend.
If NFLX can take out 1.15xbase or $120, it becomes probable that the shares will reach $131, then $147. The daily candles have not given any sell indicator to this point, nor have we seen any volume resistance.
Looking at a 1 year cycle, NETFLIX has just moved past FIB week 13, counting from the high in July. The next FIB ending date will be Fib week 21, week of July 20th. We can expect what ever trend NETFLIX is in, to continue into Fib week 21.
Question: What trend is it in?
Technically NETFLIX is in an UPTREND. Not pictured on this chart, but If you look at a 3 year chart and run a 200 day mva on it, NETFLIX has retaken the 200 day, thus it's in an UPTREND until proven otherwise.
Now, here is where it gets tricky. Because NETFLIX moved from the high above $300 a share, almost nose diving to the most recent low of $65-this leaves 2 unresolved problems.
Problem: 1--We are not able to count with any certainty, the typical EW 5 wave bear move into completion; there just isn't enough time lapse and distinctive waves.
Problem: 2--Even though the shares have retaken the 200 day average (which is technically an uptrend), the retrace of the $300 to $65 range is well within normal BEAR MARKET retraces.
We would expect the retrace to be able to do 38%, which would be $147, or 50% from the low, which would be around $170.
Given that the retrace HAS NOT BEEN ABLE TO DO the first target of 38%, $147, this is a fairly weak retrace. The current up move could be a 5 mini wave move to complete a standard 38% retrace, not a NEW BULL MARKET MOVE.
In this light, IF THIS IS ONLY A RETRACE, it points to much, much lower share prices.
Conclusion:
The bounce off the $105 level with volume support was an easy set-up catch. The stock bounced 5-7xs before making its move, giving plenty of time to enter. The upside targets of 15%, 25%, 40%, again are easy figures to trade into. Which means 1/3 of the easy trade has now passed, maybe all of it.
Was $65 the multi generational low of a lifetime or just the 1st leg down in a 5 wave bear move? This is the question that has to be confirmed beyond doubt, in order to take a long term investment into shares of NETFLIX. Right now, I DO NOT HAVE THE ANSWER to that question.
Given my expectation of a broad market pull back, the fact that we went into FIB week 13 declining, and the shares have not been able to retrace above 50%, which is $170, there is not enough clear direction evidence to risk being long, without proper PUT OPTION protection or trailing stops.
I'm willing to set this out until the completion of FIB week 21, ending week of July 20th, before considering a position. This gives both the broad market indexes and NFLX time to sort out direction.
RISK/REWARD ratio of possible $20 higher from here, verses $100 possible DOWN is just not favorable. The are better odds to be had somewhere else.
Tim Kathlina
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