NFLX is a falling knife, continues to bleed every investor trying to catch it
19 Nov, 201813 min read
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NETFLIX INC ranked among the worst performers today. It lost -5.45% to close at 270.6. It's recent 5 day performance has been -1.33%, +1.16%, -2.61%, +0.11% and -3.1%.
NFLX is currently in a down trend. Over the last three months trading short signals has not been a profitable strategy for NFLX's investors in general. However, this strategy had significantly lower risk when compared to Buy-and-Hold investing (which returned -17.43%). It is therefore better to tread with caution in the current downtrend by limiting your allocation to NFLX.
NFLX has been underperforming the SP500 index in recent time, after having outperformed till 11 Jul, 2018. Over the last 2 years and 11 months, NFLX outperformed the SP500 index on 51% days.
NFLX returned losses on 57% days in the last three months. During this time, it delivered on average -0.24% per day. It delivered it's worst daily return of -9.4%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bullish trend during this period which started on 20 Aug, 2018 and went on till 22 Aug, 2018. The bullish trend returned +5.04% to investors. This was followed by a bearish trend that started on 2 Oct, 2018 and ended on 8 Oct, 2018. This bearish trend lost -8.71% of investor capital.
NFLX had 9 profitable and 3 loss making months over the last year. NFLX was profitable in more months than SP500 index. NFLX significantly outperformed SP500 index in Jan 2018, when it returned +34.43% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. NFLX had a longer winning streak of profitable months than SP500 index. It went up in 7 straight months (from Dec 2017 to Jun 2018) during which period it delivered +81.27%.
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NFLX is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant fall in NFLX's volatility from 20 Aug, 2018 to 3 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 20 Aug, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that NFLX has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.
Investors trading in NFLX derivatives at this moment can consider 'Bear Put Spread' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than NFLX. Therefore, SP500 must receive a lower allocation than NFLX in your portfolio. SP500 index usually has shorter drawdown period than NFLX.
On a general note (since you are interested in NFLX), UNH is a large cap that deserves to be closely tracked for investment opportunities.
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