On July 20, we noted that Netflix (NFLX) should be shorted. The concept of the short was pretty simple. The shorts had capitulated and now the longs were giving up as well. The close on the 20th was $361.05 and today real time is at $316.19 for a gain of $44.88. The percentage move is 12.4%.
The first downside level discussed on the 20th was $329.88 which was the 38.2% retracement. The 50% retracement is $300.95. With the current price between these two retracement levels, we though it made sense to cover ½ of the short position.
A move under $300 would get us to cover the rest of the position and a move back above $330 would also cause us to cover the position out. Let’s see how this plays out.
A month ago we noted that Tesla (TSLA) was vulnerable as the shorts had covered after being smoked from $275 to $375 in June. We will look to the next short interest data to see if the shorts have come back for another beating as the stock has dropped from $373.573 to the current price of $308. For now we would not be a buyer of shares as the stock remains vulnerable.
With regard to the overall market, it remains mixed. The Russell 2000 via IWM has been unable to make a new high since June 2oth at $170.20. The current price today is $168.39. The advance/decline lines are mixed as well as the number of stock above their 50 and 200 day moving averages. The same can be said of 52 week highs and lows.
Traditionally, markets struggle from August into October before getting a nice rebound. It looks like that pattern may play out again this late summer/early fall.
Geoff Garbacz is the co-founder and one of two principals in Quantitative Partners, Inc. (QPI). Geoff and his team at Quantitative Partners have over 36 years of experience on Wall Street. Prior to the formation of QPI in 1995, Geoff worked for The Robinson Humphrey Company from 1990 to 1995.
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