Get ready for this trading week. I’m going to watch what NFLX does Tuesday for the stock market, because on Monday it is going to report earnings after the close. There is a lot of excitement about this stock and people are expecting it will make the stock market run after it reports and so are buying ahead of the news.
But I want to see how it reacts the next day to earnings.
Will it rise more or will the news get sold?
Netflix has been the top performing stock in the Nasdaq 100 year to date and as you can see from this chart has been a huge momentum stock for years.
NFLX gapped and ran when it announced earnings in January and has done that several times in the past few years, but it is now becoming more important than it ever has been before, because many other popular fad momentum stocks have recently been blowing up and breaking down.
For example FB and TSLA have both done this in the past few weeks and I’m sure there are people that have been trading those stocks now chasing NFLX gains instead.
The Facebook stock action is getting so sad that the Wall Street Journal has an article out this morning titled:
The FANG stocks have together shed more than $200 billion in market value since mid-March when Facebook plunged after acknowledging its data privacy issues. Facebook, Amazon and Alphabet are still off 10% or more over that time, compared with a more modest 2.9% drop for Netflix, which didn’t slide as much as peers.
But investors remain generally optimistic about the prospects for Amazon and Netflix as those companies continue to disrupt and upend the business segments they operate in—retail for Amazon and media for Netflix. And Alphabet’s diversified operations—from advertising to search to hardware—make it a dominant force in many fields.
Amazon and Netflix, which are up 22% and 62%, respectively, for the year, accounted for more than 30% of the S&P 500’s 2018 gain at one point in February, according to S&P Dow Jones Indices.
That last sentence shows why Netflix is now so important for the stock market.
And often when the stock market runs into trouble you’ll see lots of stocks gap up on earnings and dump so what NFLX does Tuesday may become an important tell for the health of the stock market in general.
While the averages have been swinging up and down there are now sectors breaking away from the market to outpeform and some breaking down into bear markets of their own. In my view the stock market volatility is not going to go way in the coming months, but will only increase. At the same time gold is starting to not only trade opposite to the stock market, but is breaking away from it in terms of relative strength.
On Tuesday after the close I’m going to do a live stock market webinar to do a complete sector analysis for you. I’ll make a post with a recording of it for you Wednesday morning, but if you want to watch it live you’ll need to go my Youtube channel.
Now if you want to trade individual sectors and stocks I firmly believe that the best thing that you can do is grab my Total Stock Trading Program.
Get it by clicking here.