Institutions are dumping NFLX within an apparent diamond pattern
Updated
I spotted this diamond a year ago after the earnings panic.
Since then, I realised that institutions have been dumping Netflix at a prodigious rate.
In fact, NFLX has gone from nearly 100% institutional ownership, down to 74% institutional ownership in around 15 months.
This translates to institutions performing a dump of just over 1.5% of institutional holdings every month on average.
I think this short has a lot of potential if I am correct about the diamond pattern and it's clear that the catalyst is going to be institutional deleveraging.
What I'm looking for to confirm this trade is an ABC move up.
That is to say, the dump back in October Q4 was an A wave down, we are now in a B wave (that subdivides into a smaller ABC move up) and confirmation of this trade will mean that we complete the ABC I have sketched out (zig zag pattern) up to roughly around the 400 range.
An ABC up in this manner means we have a B wave with a C wave decline yet to materialise and it's the C wave we should aim to capture with a short.
I consider this quite a long-term outline and I don't envision this C wave to materialise until next year.
My suspicion, is that NFLX is being harmed by the streaming explosion that has resulted in a massive influx of very aggressive competitors. I think that the password-sharing crackdown will ultimately do more harm than good and do nothing to help their earnings.
So, I'm not saying get in on this now, but the basic premise here is to wait to see if the ABC zig-zag upmove (representing a cyclical B wave) materialises. If it does, I consider NFLX could be an excellent short.
Since then, I realised that institutions have been dumping Netflix at a prodigious rate.
In fact, NFLX has gone from nearly 100% institutional ownership, down to 74% institutional ownership in around 15 months.
This translates to institutions performing a dump of just over 1.5% of institutional holdings every month on average.
I think this short has a lot of potential if I am correct about the diamond pattern and it's clear that the catalyst is going to be institutional deleveraging.
What I'm looking for to confirm this trade is an ABC move up.
That is to say, the dump back in October Q4 was an A wave down, we are now in a B wave (that subdivides into a smaller ABC move up) and confirmation of this trade will mean that we complete the ABC I have sketched out (zig zag pattern) up to roughly around the 400 range.
An ABC up in this manner means we have a B wave with a C wave decline yet to materialise and it's the C wave we should aim to capture with a short.
I consider this quite a long-term outline and I don't envision this C wave to materialise until next year.
My suspicion, is that NFLX is being harmed by the streaming explosion that has resulted in a massive influx of very aggressive competitors. I think that the password-sharing crackdown will ultimately do more harm than good and do nothing to help their earnings.
So, I'm not saying get in on this now, but the basic premise here is to wait to see if the ABC zig-zag upmove (representing a cyclical B wave) materialises. If it does, I consider NFLX could be an excellent short.
Trade active
I first went short a few weeks ago because I suspected there could be an earnings panic today.We got flat earnings, negative subscriber growth and negative revenues.
This could be the first part of this short. I will manage the position carefully.
Additionally, an important factor is that institutions have further deleveraged.
As of last week (so, not including todays selloff) institutional stake has decreased to 69% of ownership.
Note
The next institutional ownership data point is out next week.I have doubled-down on this short.
So far, so good.
Note
For those who are following this, here is a detailed run-down of the sheer pace of institutional dumping.We are down to 67% as of April 30th. This is a reduction of nearly 40% since Q4 2021
Year/Mo/Da - % of float owned by institutional investment companies.
2023/04/30 - 67.84%
2023/03/31 - 68.26%
2023/02/28 - 73.45%
2023/01/31 - 74.85%
2022/12/31 - 89.33%
2022/11/30 - 87.26%
2022/10/31 - 87.12%
2022/00/30 - 88.16%
2022/00/31 - 86.74%
2022/00/31 - 85.50%
2022/00/30 - 86.81%
2022/00/31 - 89.90%
2022/00/30 - 89.10%
2022/03/31 - 90.38%
2022/02/28 - 96.59%
2022/01/31 - 96.62%
2021/12/31 - 97.43%
2021/11/30 - 99.95%
2021/10/31 - 99.46%
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