NFLX has a good set up…
Hi fans! Wow, my last trade was almost exactly a year ago. With the market going down I was having a hard time finding trades that I felt comfortable, but I’ve been refreshing my knowledge and skills and feel more confident in a downwards or sideways market. But since march, the market has been on an uptrend with many strong stocks making steady gains.
I began making my current watchlist 3 days ago, and surprisingly, 1 or 2 came in with nice setups.
Today I purchased a long call on NFLX 42.5 September Option at $3.60. The underlying was at about 41.00 at the time. I see support at 37.50, for a risk of $3.50 on the underlying. Since the option’s delta is currently at .5, that’s a risk of $1.71 on the option. Since my trading rules tell me to sell if the option falls to half price, I’m well protected in any case.
Below is the 6 month chart. The two moving averages are 30 day and 7 day simple. Yesterday the stock closed above it’s 7 day moving average with volume after a pullback. There are a few red flags in this trade which I will note for my own future reference in the event that this goes south. Impatience is a major flaw in trading that I have to work out The flags are the lack of a consistent uptrend in the 30 day MA. It uptrended for a bit, and is now downtrending. In addition, Investools shows that it’s Industry group is out of favor, but Investors.com (Investors Business Daily) shows it’s industry group as an A+.
Suzanne @ June 18, 2009