NFLX has been in play since the huge move on Thursday. I looked to trade it on the short side on Friday as it was overextended and had a powerful Opening Drive to the downside. It ended trading off about four points from its high but failed to close below 81 which had been a key support level on Thursday. I came into today prepared to trade long or short depending on how it behaved at key levels.

On the Open it had a powerful drive down and then consolidated in a 70 cent range. This was very similar price action to Friday where it broke to the upside above 83 and had a move to 84.80. So I waited for a break of today’s range which was 80.80 by 81.50. After it broke to the upside I bid below 81.50 to get long when momo scalpers hit their shares on a failure to hold the 81.50 level.

I got long at an average price of 81.40. It quickly traded up above 82 but I took no sales as my targets were Friday’s key levels of 83 and 84.80. NFLX traded lower and found 81.27. It then started to hold above 81.50. I placed my stop below 81.25. The risk on the trade was less than 20 cents and my two targets were 1.60 and 3.40 above my entry. I liked the risk/reward on this trade a lot.

About 20 minutes later the market made a new low and I was stopped out at 81.22 for an 18 cent loss. As I write this blog two hours later NFLX is at 83.50. Part of day trading is making dozens of good risk/reward decisions each day and not worrying if you are stopped out for a loss on some.

Steven Spencer is the co-founder of SMB Capital and SMB University and has traded professionally for 16 years. His email is [email protected].

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