NetFlix has tripled this year.
They don't seem to fundamentally have a protective moat against competition, much less something that justifies a 380 P/E. Their business (profits) would have to grow 20-fold for them to justify a 19-to-1 P/E. How likely is that?
So, they look like an over-valued, momemtum drive short candidate to me. The question is how to do so? One could:
- Short it right now with no stop and hope you are right (seems risky).
- Short it right now with a "higher-high" being a stop.
- Wait for the 20-day moving average to be broken to short it - seems like a decent possibility.
- Buy out of the money cheap put options. Actually put options look pretty expensive to me so I think I'll pass on that.
Let's take a peek at a couple of other potentially similar situations. AAPL running up to its all time high is one:
At the end of its three month tear above its 20-day moving average along its upper bollinger band it fell immediately (within a couple of weeks) to its 50 day moving average (12%) and within a 6 weeks fell to the 100 day SMA. So, going short on 20 day SMA break at the close and covering on a 50 day break at the close makes sense or covering at the 100 SMA intraday touch makes sense. Having a stop of a retouch of the previous high looks sensible. The same system would have worked on that final nearly 2 month long tear above its 20 day SMA.
Here's a recent AMZN chart. The same strategy would have worked. Maybe I'll give this a twirl with NFLX. Let me know if you know of any bullish NFLX fundamental analysis.