Netflix (NFLX) has been one of the most consistently volatile names in the last year, slingshotted up and down by a seemingly perennial mountain of headline risk. The last few months have been positive for NFLX. The firm has staged a parabolic move since August, more than tripling as investors piled into oversold shares. But parabolic moves aren't sustainable, and now looks like a good time for investors go take gains.
Netflix is currently forming a head and shoulders top, a pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. The sell signal comes on the breakdown below the pattern's "neckline" level, currently at $175.
While the head and shoulders top in Netflix is tiny, indicating short-term trading implications, the fact that it comes at the top of a parabolic move adds a lot of potential downside to this setup. I wouldn't be surprised to see a major retracement here, especially given the volatility in this stock.If you decide to actively short shares, do yourself a favor and keep a tight stop in place.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV