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Surviving Netflix in an Apple and Amazon World

Stocks in this article: NFLXAAPLBBBYDELLAMZN

NEW YORK ( TheStreet) -- If you're a current Netflix (NFLX) investor, you're probably ready to boycott Apple's (AAPL) or Amazon's (AMZN) websites.

NFLX Chart NFLX data by YCharts

Netflix is not adding as many subscribers as investors had hoped, and it's no surprise why. With so many content delivery choices available, a budget "one size fits all" model has limitations. Netflix has 30 million subscribers and not one of them is offered any products beyond the basic service.

It's money that Amazon's Prime and Apple's iTunes doesn't leave on the table like Netflix does. More important for now, how can Netflix's crash turn into profits?

Based on my experience with gap-downs following missed expectations similar to Netflix's, the odds favor Friday or Monday marking the short-term low. Strong gap-downs based on earnings releases historically take a day or two before sellers finally take a rest.

Bargain hunters and short sellers covering positions could push the price up about 50% in relation to the gap-down price. Looking at the chart, I expect short-term resistance near $70. Round numbers often attract like a price magnet and repel, causing a bounce. Expect a lot of volume to trade near $60 a share today, but also be prepared for a closing under the open, and a more than 50% chance of a close under $60.

If you are looking for Wednesday's drop to signal a buying opportunity, you are likely going to find the end of the day Friday better than today. There is no hurry jumping on board with Netflix.

Stocks dumping as a result of earnings misses usually take a full two good earnings quarters to recover. Take your time and do your homework before allocating capital here. Look for the second break above $72.50 as the one that "sticks." (Read my Will Apple's Shot at Google Hit RIM and Netflix Instead? article.)

Want to see a classic missed earnings result a few weeks after the fact? Take a look at Bed Bath & Beyond (BBBY).

Bed Bath & Beyond disappointed and traded from $73 down to an intraday low under $60.61. Also, take close note of the next few days after earnings. This is a classic pattern I see often, and you can, too. Simply use your software to look at charts from the past few quarters and review the ones that gapped down the next day. The high placed a couple of days after the gap down in Bed Bath & Beyond is now resistance.

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