I’ve recommended buying the December 400-410 call spread for 0.40, but with a contingency on the order that would have you lower your bid by 2.5 cents for each $1 decline in the stock beneath 333.50. Subscribers reported filling the order yesterday for between 0.38 and 0.42, so I’ll use 0.40 as a cost basis for a tracking position.
To be clear up front, this is a speculative play that will require a strong ‘Santa rally’ — I hate that phrase — to make us money. However, my expectation for an upsurge is not exactly a shot-in-the-dark. I’m using the 411.45 Hidden Pivot target shown (see inset) as a lodestone, and my hunch is that it will come quickly once NFLX impales the red line (a Hidden Pivot midpoint resistance.). Moreover, if the broad averages do indeed catch holiday fever, NFLX is almost certain to be a high-beta performer.
For now, though, buyers are still nursing their wounds from NFLX’s October 22 death dive. That was the kind of bull trap that will take a while for the buyers who got sandbagged that day to forgive and forget. But it looks like they are convalescing just fine so far, even maintaining altitude after recently tripping a ‘buy’ signal at the green line.
Those who have already bought the spread should sit tight. If you haven’t, continue to bid 0.40, adjusting the price by 2.5 cents for each dollar above or below 333.50. Under no circumstances should you pay more than 0.43, however. The order should be marked good-till-canceled. _______ UPDATE (7:12 p.m. EST): Subscribers reported filling the spread for as little as 0.17, although this required legging into it one side at a time at different times. The spread closed yesterday at 0.56, but you should continue to bid for it on the basis suggested above. _______ UPDATE (November 18, 1:47 a.m.): Steady as she goes. On the weekly chart, a pattern beginning with A=282.80 (10/11) implies smooth sailing over the near term to 362.38, the Hidden Pivot midpoint of a rally pattern targeting 415.56. It is bullishly coincident with the one yielding 411.45 identified above, meaning there are two strong uptrends impelling this vehicle higher. _______ UPDATE (November 18, 9:08 p.m.): Yesterday’s presumably gratuitous dive wasn’t exactly the ‘smooth sailing’ I’d envisioned. The bigger picture remains bullish, however, so we’ll continue to sit tight with our cheapie call spread. _______ UPDATE (November 22, 4:22 a.m.): The rally appears to be back on track. Now let’s see whether it can end the week with a push to new highs. _______ UPDATE ( 2:26 p.m.): No such luck, since today’s feeble rally in the early going died and has since reversed. To hold December calls in this stock is to be acutely aware of how very distributive recent price action has been. Had the whole world already bet heavily on a ‘Santa rally’? (I hate that phrase, since it metaphorically associates the Christmas holiday season with the fetid swamp of lies, greed and criminal deception that is Wall Street.)