Changing The Tune

NFLX stock price surged more than 10% after it has reported earnings on Monday. The after hour price action appears to be following what GOOG stock price has done after it reported its earnings. Then something happened in the Tuesday session, NFLX changed the tune. It has decided not to play the song GOOG played and its stock price came straight down after gapped up on the open at a new all time high near the 390 level.

On the daily price chart, it shows NFLX formed a huge solid bearish engulfing candle, and it appears to be on its way back down to test the lower support trend line of the rising price channel near the 300 level.



The lower support trend line price level near 300 is also close to the 2011 high shown on the weekly price chart. If NFLX ended the week at a price near the low of the week, then a bearish shooting star candle would have been formed and the price could be headed back below the 300 level.



From the 30 minutes intraday chart, the price action reinforce the cliché “price goes up on an escalator and come down in an elevator.” Also from the intraday chart, there is a small price gap from 10/10/2012 with the gap level of 301-306. This gap fill could be another catalyst for the price to come down to the 300 level.



NFLX price action after earnings report appears to mimic the price action of GOOG until…the market decided to change the tune. Is it only a change in tune or the music is about to be stopped for NFLX? The price action near 300 might provide an answer. Keep watching and trade what you see, not what you believe.

Disclosure: Long NFLX PUT spread.