Wednesday, January 5, 2011

You Need to Keep Adapting

You need to be able to adapt or will be eaten.

Take a look at Netflix (NFLX) and how it has been trading recently. It’s held the 50-day (Black Line) for months and has been holding a low at $175. Monday it broke below the 50-day and took out the $175 low. The next day it opened above the 50-day on an “upgrade” from a “analyst” and no doubt hosed a bunch of people who got stopped out the day before.

That is today’s market. There is no way that the breakdown was not manufactured. It did exactly the same thing in November and October, breaking support a few days before ripping to the upside.

Here is the chart that I am now using. On it, you can see that there was support at $173 and there was timing on Monday for a low. I did not sell the shakeout. I would have been very upset if I had. NFXL is by no means out of the woods. It needs to clear $182 and then $190 to get the trend back up.

The point of this is now whether NFLX will go up. The point is that you need to use what is working and change as the markets change. How many times now has IBD gone to “Market in Correction” the day the market has bottomed? You need to keep adapting or you will be eaten.

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