First, in August, came the news that Disney was pulling all of its content from Netflix Inc. (Nasdaq: NFLX) in order to start its own streaming business. This created a frenzy in the mainstream media, with the pundits arguing between themselves about whether or not the streaming goliath could even survive.
Then, in October, the stock fell 1% after the indefinite suspension of one of its star shows, "House of Cards," following multiple serious Kevin Spacey allegations.
And now, we know that Ann Mather, who serves on Netflix's board of directors, sold 3,885 shares of the stock for $777,000.00 back on Nov. 7.
All of these developments have got investors and traders nervous about putting any money down – and understandably so.
The good news is… you can actually profit no matter if Netflix stock skyrockets or plummets from here.
All you need is this NFLX trade setup…
Two Strategies to Cash In on NFLX – Whether It Goes Up, Down, or Doesn't Move at All
Before we get to your best profit opportunities, let's talk a little more about the two leading reasons many of the pundits have gone decidedly bearish on Netflix Inc.
- Hollywood. The multitude of stories surrounding prominent figures in Hollywood hasn't boded well for the entertainment industry. It's carried over into online-streaming arena, and the companies providing that content as well, especially when it comes to NFLX. The pulling of the company's flagship program is a noteworthy concern, but it's not the end of the road for them. NFLX is building its brand, establishing its reach, and producing even more digital and streaming content, to which TV is playing catchup. So it has a strong chance of weathering this storm going forward.
- The Walt Disney Co. (NYSE: DIS). According to Disney's company Chair and CEO, Bob Iger, its new streaming service (launching in 2019) will be "substantially below" Netflix's monthly subscription. Keep in mind that NFLX didn't drop a precipitous amount on the initial news that Disney was pulling its content. And during recent earnings, NFLX CEO Reed Hastings said the loss of this content wouldn't have that adverse an effect because its expansion into the international markets is going so well. He also pointed out that Disney's content was only available in a few countries anyway. In fact, Netflix added 5.3 million new subscribers in the fiscal third quarter, with 4.4 million of those new subscribers making up the international market (850,000 added were in the United States). And while "House of Cards" may have been its flagship program, NFLX has been busy building more original content, such as the hit shows "Stranger Things" and "Narcos."
Now, I'm not going to presume to know what will happen from here, but I can give you the best trading strategy to consider – whether NFLX goes up or down next…
In the chart above, you can see an established support for NFLX at $190, which was its previous resistance peak back in July. As you can see, the stock just recently bounced off a retest of that price. It's also seeing declining tops in what is possibly going to result in a technical triangle pattern forming. From here, NFLX will either bounce higher and take out this declining resistance level or resolve itself to the downside. This could take out the $190 support, which could see a further move to a recent pivot low at $175-$177.
Ultimately, though, the stock could move in either direction.
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.