Bearish Engulfing in NFLX Should Cap Near Term Gains

[Steven Place]

This momentum stock saw a monster gap up today but was sold very aggressively back down to its range lows.

 

The trade thesis is that NFLX won’t go retesting that 320 level in the near term. It will most likely pullback further or chop around for a bit.

Here’s the trade I like

Sell Oct 325/330 Bear Call Spread for 1.00 or higher

Now you don’t have to do a full position here, if we see a bounce then you can scale in with a better cost basis. The stop loss is if NFLX regains today’s high, thereby invalidating the bearish signal in NFLX.

This is a countertrend play so the odds are lower on this one, so consider smaller position size.

[Author]

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