For weeks, I’ve been highlighting the relative weakness we’ve been seeing in NFLX and today’s action gives us another potential setup for a short. Above is a 60-minute chart of NFLX, with the SPY in the lower pane for comparison. What really stands out to me is the disconnect between NFLX and the broader market. SPY gapped up higher today and even took out Friday’s high, yet NFLX couldn’t get halfway through Friday’s range. That inability to keep pace in a strong market is exactly what I look for when hunting for relative weakness.
On top of that, NFLX put in an inside day today. I always pay attention to inside days because they can set up low-risk entries, whether you’re going long or short. In this case, the inside day following a lower high in a stock that’s lagging the market gives me a short bias. The way I plan to play this is to watch for a break below the low of the mother candle which is 90.81. That would be my trigger to enter a short position, confirming the relative weakness I’ve been tracking.
Of course, context matters. If the overall market starts heading lower as well, that adds more weight to the setup and increases the likelihood that the trade will work out. I’ll be monitoring not just NFLX, but the broader market action to see if it aligns with this bearish bias.
As always, I’m letting the chart guide me. The combination of a lower high in a strong market and an inside day makes this a textbook relative weakness setup. I’ll be watching closely to see how things unfold and will be ready to act if NFLX takes out the low of the mother candle.
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