MLR - Education on selling and rebuying pocket pivots

Published : January 10 2011 at 16:58 ET

 NFLX today issued a pocket pivot. It has had the following buy/sell signals based on our buy/sell rules using the 10d and 50d moving averages detailed on our website FAQ and in our book:

8/6/10 buy (pocket pivot)

8/24/10 violates 10d moving average within 7 weeks so hold and use 50d moving average violation as sell stop.

9/20/10 pyramid (it's under the 10d moving average but relative to the overall chart, is constructive and thus buyable)

10/20/10 pyramid (clue given right before earnings report)

1/3/11 sell (50d moving average violation)

1/4/11 could rebuy but midbar close so weak pocket pivot. Also, much high volume selling in prior weeks.

1/10/11 rebuy- stock has put in just enough contructive price/volume action to buy it back here. Sell stop at 176.2 and/or 175.4, depending on your risk tolerance levels.

It can be psychologically tough to sell a stock then have to buy it back a few days later, but our studies have shown that leading stocks can exhibit this pattern. Of course, ROVI is a potential NFLX competitor, although that is not their stated objective, so you may have elected to buy ROVI on our earlier ROVI pocket pivot report. That said, NFLX may be signalling that there is space at the top for both companies.


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