Netflix was down over 16% after hours on Tuesday, July 24th, 2012. Below, you will find the blog post I published after NFLX‘s last earnings’ report. Indeed, there are some striking similarities with the huge exception, of course, being that price is much lower since that post.

However, beyond the fall of the Netflix is the larger educational tool in using logarithmic scales on your weekly and monthly charts of momentum leaders that see spectacular price appreciation in relatively short periods of time, especially when they start to go down the other side of the mountain. 

Please click here for link to original post, pasted below. 

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Not Even Ben Bernanke’s Power Beard Can Save Netflix

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Netlfix is down over 16% in after-hours trading in light of its earnings report, firmly below the $100 level. Now, I know that a rudimentary bearish post here would be nothing more than piling on the likes of Whitney Tilson and other assorted characters who have been bullish on the internet subscription service which streams television shows and movies. Be that as it may, as far back as October 2011 I was discussing the major sea change the stock had seen. I also drew quite a few comparisons, from a technical standpoint, between the Netflix and Green Mountain Coffee Roasters’ charts.

With that in mind, I might as well complete a thorough analysis of the price action of both firms’ shares.  I updated my GMCR analysis earlier today in this post. More importantly, though, is the value in using logarithmic scales for longer-term timeframes when issues have seen dramatic moves. Recall this post from earlier in the month, where I argue that correctly using a logarithmic scale in lieu of an algorithmic one yields evidence that points to much further downside potential in GMCR. Applying the same principle to Netlix, we can clearly see the difference between the two scales on the same exact timeframe.

Thus, even if this current bull market continues higher in the coming quarters, the old leaders will not necessarily keep their thrones. Leadership changes as the bull matures, with GMCR and NFLXnow serving as the old, washed-up Las Vegas acts, lucky to procure gigs in off-the-strip lounges.
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