Time to Short the Netflix Stock?
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Consumer instinct is a wonderful attribute to have and is generally talked about when considering stocks to buy.
What Is the “Consumer Instinct”?
“Peter Lynch is one of the most famous investors in the world. A former manager of the Magellan Fund at Fidelity, he averaged a whopping 29.2 percent annual return in his day. Lynch’s number-one philosophy on investing is only buy what you understand.
He states, “If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them.”
Our research tools are our eyes, ears, and common sense. Lynch believed that we all can see emerging trends when we watch TV, read the newspaper, or listen to the radio.
Today, I am using that consumer instinct not on what I want to buy, but rather, on what company has greatly disappointed me lately.
Netflix (NASDAQ:NFLX).
Fundamentally, there are some concerns.
Their earnings and subscriber growth have been spectacular. But can that sustain all the competition?
The stock’s price has risen from its trough in 2022 at $164 to today’s peak at $627.
Netflix-Daily and Monthly Charts
I am finding less and less quality content to watch.
I often think that AI is writing the same scripts over and over again.
I spend a lot of time surfing through the shows-and I am disappointed.
So, given that it is possible Netflix could be topping out, what would we look for?
On the Daily chart, NFLX is consolidating.
Netflix is outperforming SPY.
On Real Motion though, the momentum is declining.
Should NFLX underperform SPY or break the 50-DMA in momentum? Those are 2 clear signs.
On the monthly chart, NFLX has rallied to the last high in 2022 before the big crash happened.
Now with FOMC, yields rising, and consumers starting to feel the pinch of inflation and high rates, we could see this stock as one of the first primo runners begin to sell off.
Should NFLX fail to breach 620 and run up higher OR should the stock begin to break 602-600, that is a low-risk opportunity to buy some protection.
ETF Summary
- S&P 500 (SPY) 510 pivotal
- Russell 2000 (IWM) 202 if holds good sign
- Dow (DIA) 385 support 400 resistance
- Nasdaq (QQQ) 428 the 50-DMA support
- Regional banks (KRE) 45-50 range
- Semiconductors (SMH) 214 support 224 resistance to clear
- Transportation (IYT) 68 area support
- Biotechnology (IBB) 140-142 resistance 135 support
- Retail (XRT) 73 support 77 resistance
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 77 big number to hold. Over 78 risk ON
