This 20+ Billion Dollar Company Was Up Almost 20% Today

The shorts were impaled today...
The shorts were impaled today…

So how is it NFLX gapped up (if you don’t know what a gap is, click here) more than 18% today you ask?

Pretty simple actually…

A massive short covering rally.  There were lots of shorts in the stock with stops in the $490 to $500 area.

They got swept today.

Don’t get me wrong… I’m sure there was fundamental buying as well… just not a lot.

Is the company worth the 140+ * twelve month trailing earnings?

Doesn’t matter really.  The market took the stock to a temporary equilibrium in the stratosphere, but tomorrow will likely be an entirely different one.

What Now

This is a strong breakout from a long and wide range, so it’s probably true.  However, my guess is the next high probability trade is to catch a retracement back toward what was resistance and is now support in the $490 to $500 area.  If (as I suggest) you don’t play the short game with individual stocks you can wait for a pullback toward that same $490 to $500 support zone to initiate a long position.

If you already own the stock, do nothing, but hold it… and maybe have a (another?) celebratory drink tomorrow evening.

Good Trading…

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