NEW YORK (TheStreet) -- The stock market again rallied to record highs as investors remain optimistic during the third-quarter earnings season.
Netflix (NFLX) reported earnings on Monday after the close. The stock jumped in after-hours trading and opened at a new all-time high on Tuesday before plunging 17% and closing near session lows.
Josh Brown, a financial adviser at Ritholtz Wealth Management, said that on the technical side, the stock formed a "bearish engulfing candle" where the open, high, low and close from one session are wider than in the previous session.
He advised not buying the stock due to the bearish technical pattern and told investors to wait for the stock to bottom out.
Steve Grasso of Stuart Frankel said a lot of fund managers may be pulling out of momentum names for the time being and going into steel and industrial companies. Eventually, they'll rotate back into the momentum stocks.
Mike Khouw, managing director and primary strategist at DASH Financial, said those looking to short Netflix could start to consider it now that sentiment seems to have turned much more bearish.
Jon Najarian, co-founder of optionmonster.com and trademonster.com, noted someone appeared to be selling large blocks of the stock. It turned out to be hedge fund manager Carl Icahn, who tweeted he had sold some of his stake while the show was in progress.
Grasso said this might be a good thing for those looking to get long since Icahn was simply locking in gains. Brown disagreed, saying that while it is responsible to realize profit, he doesn't want to be buying when Icahn is selling.
Grasso also said traders could buy Google (GOOG) if $1,000 acts as support.
Michael Pachter, managing director at Wedbush Securities, was a guest on the show and said Icahn's exit from Netflix doesn't really change his bearish opinion. He added Icahn's move could indicate the run is close to over in the stock price. He concluded the company's cash flow and content costs will eventually wreak havoc on the earnings results.
Dan Nathan said it's a bullish sign Icahn is still holding a 4.5% stake, but if Netflix original content is a flop, it'll kill the stock. He added the company has spent a lot on international expansion without a lot of revenue to show for it.
Najarian is a buyer below $300, Brown doesn't like the stock, Grasso is a buyer if it holds $290 and Nathan said he would short it.
Kevin Landis, CIO of Firsthand Capital Management, said Twitter is different than Facebook (FB) because it is a great business tool. He added that once businesses and users figure out the best way to use it, the company's stock valuation will be able to expand. Regarding Netflix, he suggested investors wait for CEO Reed Hastings to defend the stock before getting back in on the long side.
Brown said investors will want to be long Apple (AAPL) going into the holidays, especially with the unveiling of its new iPad Air tablet and free productivity applications.
Gene Munster, managing director and senior research analyst at Piper Jaffray, was a guest on the show and said the iPad Air and new free apps should be very positive for Apple. The higher prices should help improve profitability and margins but will likely come at the expense of market share because there are so many low-priced tablets offered by competitors.
For momentum plays, Grasso was a buyer of Tesla Motors (TSLA) , while Najarian was a buyer of Google and Apple.
Nathan said he shorted Chipotle Mexican Grill (CMG) via long puts, citing earnings deceleration and a full valuation.
Brown said there is a problem with shorting stocks like Chiptole: Portfolio managers are willing to overpay for growth companies because the global economy is growing so sluggishly.
For their final trades, Najarian is a buyer of the iShares U.S. Real Estate ETF (IYR) , Brown said to buy Freeport-McMoRan (FCX) and Grasso is buying Google. Khouw said to sell out-of-the-money call spreads on Facebook, while Nathan suggested buying puts on Chipotle Mexican Grill.
-- Written by Bret Kenwell in Petoskey, Mich.
Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.