Tempting long breakout plays like Netflix could easily have thrived, and indeed did, earlier in the year when the market had much stronger underlying conditions. However, the market has been experiencing one crack in the foundation after the next of late, and that usually presages a moment when even the more enticing of breakout plays not only fail to explode higher, but actually trap in longs and aggressively plunge lower to flush them out. The fact of the matter is that most breakout plays, on a timeframe ranging from days to weeks, need a reasonably healthy market to complete the initial move, let alone sustain themselves.
Here, many eyes were on Netflix, as I noted in a video market recap earlier this week. A consequence of an increasingly selective market is that many hot money traders begin to gravitate towards the narrow corner of that which is working well. But as you can see below on the daily timeframe, the breakout setup on Netflix has been postponed indefinitely.
However, and this is a critical point, Netflix has still held its massive gap higher from earlier in the year. To call this a flat-out bearish chart for the coming months is likely a mistake. Furthermore, we know the market is nowhere close to being in an established downtrend.
Thus, the most probable scenario we are looking at here is a simple reset before another run at a breakout is made, which could take as little as a few days, depending on whether the market weakness metastasizes into a bonafide correction. I am looking at the $140 area as a must-hold for bulls.
Either way, crowded trades with many eyes on them in selective markets are often too good to be true.
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$XLP is exhausted
looks like it