I prepared NFLX in great detail but it was not easy to form a bias. There was an earnings miss with a positive reaction. But there were some elements in the catalyst that were positive. The technicals were also strong so a reversal wasn't obvious at all. In the end the price action fitted the catalyst and setup: indecisive and choppy. Nevertheless, there was a solid trend PB trade that occured EOD. SPY was trending all afternoon and this was an important factor.
2. Bigger picture: QQQ/SPY and VIX
SPY & QQQ
SPY and q’s both had small
range days and held below
the 50SMA. First sign of
weakness. Currently they
are gapping up 0.3%, 2
points from yesterday’s low.
Both stocks reclaimed the
50SMA and trended all day.
VIX level : 20.
VIX opened around 20
which means we’re in a
high volatility environment.
3. Gameplan
2) What are potential setups. What are the playbook indications & statistics I have for these
setups? Compare. Does the setup match the catalyst? How does this setup compare to your
other playbook setups, grade/rank them.
Difficult to rate the catalyst after seeing multiple data/ opinions. Shortbear hints that the media
is overreacting. Seen other data that didn’t look great. But the increase in subscribers is strong.
The market is reacting positively premarket. A very big gap. But the last earnings gap was bigger
and closed green, but then earnings were positive. NFLX has been very strong the past 8
months.
Setup could be a reversal gap up. That’s an UAL kind of setup. There we had an earnings beat,
gapped up but traded down. This was market related, and this ticker was very extended. Not
really the same setup, because NFLX didn’t go parabolic.
But we were strong, so today could be a big red day. It could be the reversal of yesterdays setup
on PG. Had decent news, gap down and pushed to the previous day lows.
We could have that scenario today and I would want to look for trend trades to capture.
If the market sees that catalyst truly positive, and the market is aligned. We could have a really
strong day the upside and push towards the upside of channel were in, perhaps to 350-
355.Then we could have a strong earnings play like DELL.
Or we could have a smaller green/red day after this gap, where the market is a bid indecisive.
I think the most likely scenario is a gap up reversal setup. This would mean that the market has
overreacted to the catalyst. We’re not extremely extended, but we can trend down.
4. Catalyst + Setup + Trade
Catalyst + setup
-We have a positive earnings reaction (strong gap up) that isn’t matching with the
earnings miss (catalyst) If we had an earnings beat, I would have higher conviction in
a strong move. The catalyst wasn’t entirely negative, there were some positive
aspects and therefore it was hard to form a strong bias.
-The volume was very strong premarket: 8% volume buzz.
-The technicals are very strong. We are within an uptrend channel, but still had
plenty of room to trend within this channel.
Trade that fits this setup.
Range day
In hindsight, the price action we got most of the day fitted the match of the catalyst
and setup: choppy and indecisive. We formed an OR of 1 ATR and traded within this
range all day, most of it below VWAP. I did a good job identifying the key levels
where this setup would be a good long and short. It traded within this levels most of
the time.
Trend (PB) trade
But EOD reclaimed VWAP and increased volume. SPY started a strong trend as NFLX
started to trade towards, and later reclaim, VWAP. The strong market was an
important factor. The lack of strength and weakness made that only trend PB’s
trades were a possibility. This is not going to HOD very likely, but should be able to
structure a 3RR trade here.
5. Catalyst &
Fundamentals
Catalyst: Earnings: huge miss on EPS 0.12 vs 0.46 expected.. They
have a CEO change. They see resuming share buyback program.
Big increase in new subscribers.
Setup: Positive earnings reaction.
Premarket pre buzz: 8%
Float: 438 million.
Institutional Ownership: 80%
Short %: 2,11%
ATR: 11,56.
Average Daily volume (50 day): 9,1 million.
Daily volume: 28,4 million.
Gap%/Gap ATR: 6,46% / 1,77ATR
RVOL: 7.
6. Daily chart
NFLX is in a strong up trend
channel, the top of this channel
would be 355 about a 2ATR move.
Yesterday we saw significant selling
into the earnings day. The volume
in this uptrend has been very
strong, but yesterday was the
weakest day. This might be a clue
that big players are selling.
Large gaps, even larger than today
are not uncommon. Probably those
were earnings days. With a positive
catalyst they made big move to the
upside. But this only tells me that
the larger gap doesn’t mean we
can’t move more to the upside.
7. Key levels
Premarket support around
333 is important. Below
we are likely to have a gap
up reversal setup. This is
the infliction for this setup.
It’s also a very important
HTF level.
-Then I would look at to
trend towards 325
yesterday’s HOD or even
315 yesterday’s close if
we’re extremely weak.
-Above premarket 333 and
premarket high 339 we
could have a strong move
in the direction of the gap;
up. The I would look at
350-355 for resistance.
8. Trend PB - Trade2hold – Trade Management
Trade2hold - Flat
Significant 5m close above 20 EMA:
1) close on above average buying
volume;
2) a new 5m high that occurs after
close;
Goal: don’t sell more than 50%
when going flat.
Reason2hold
-Shallow volume and making lower
highs. Sometimes the trend is still
intact when there’s a significant
close above the 5m 20EMA.
Trade2hold – Exit strategy
-Sell into strong close.
-Time factor: take profit into
strong push before the close.
Trend PB
Entry: After price pulled in 5m 9 or 20 EMA
and after a top has formed on tape:
-We can’t trade lower.
-Tape starts to get stronger.
-Bids are stepping up.
-Stronger offers get taken out.
Risk: At the bottom of the pullback.
9. Technical
Analysis:
(HTF) Trend PB
10m holds above 9EMA,
5m holds above 20 EMA.
Shallow volume during PB
Pullback visible on multiple time
frames: 1m, 5m, 10m.
Bounce of key level: 339
Elevated volume when PB
starts to work.
10. What could I have done
better?
• On setups that don’t fit the catalyst well it’s still possible to have
trend trades! Even when the price action is chopping around
below VWAP a bullish trend PB is still possible. Set alerts!
I should have set different alerts:
-Price level: 339. This was premarket high, and my infliction area
for long setups.
- VWAP. Always important to set an alert on these types of days
to spot an CHOCH early.
-Volume candle that is doing above average volume. Is extra
confirmation for strength, weakness or CHOCH.
These alerts I can also use for my exits on trades2hold. Only
when an alert triggers, I can sell. This is something to systemize
and I could work on holding longer.
• I should implement a noon checklist that I can use to set alerts. I
can use this also to gameplan potential EOD trend trades. I have
missed plenty of setups last week because I wasn’t ready and
didn’t adapt. Using this checklist, I will be more proactive for
potential playbook trades. And I will miss less.
