Today, we are approaching the market with a “prove it” attitude. The market is going to have to prove that it is really rolling over here as opposed to just working off its recent overbought status with a sideway-to-lower move. The later case plays right into the hand of a good long entry location in Netflix (NFLX).
NFLX was hardly effected by the broad market’s gap down yesterday which is a signal that there is support for the stock around the current price level. If a decline in stocks brings NFLX into the lower ascending trendline today, we will look to enter the stock long. With a stop placed just below prior resistance (dashed line, magenta ovals) while targeting the upper trendline, this trade idea has a better than 5 to 1 reward to risk ratio.
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