NFLX streaming to a home near you…
The market is entering into a PTSD (Post Traumatic Stress Disorder) period as it recovers from the near loss of the Euro. It is not over yet, because the politicians love to talk, but the boogie man seems to be back in his cave for a while. Not that all the other news is really great as we wait for the job picture. I do think the good housing news is key. That has been an industry in decline since late 2007 and it might be picking up some jobs finally. Now roughly 5 years later and with qualified buyers at 3.5% mortgages it sure smells like the low. But as traders dip into housing stocks after being burned for 3 years or so, they now jump into another roach motel (“traders check in but they don’t check out”, to paraphrase an ad jingle), NFLX.
But is NFLX going to be the next big roach motel? The way it comes up on my radar is the AlphaVision™ Gap Screen for Bloomberg. I use a difference of 10 Day Historical Volatility and 30 Day Historical Volatility to see which stocks are moving lately. The move in NFLX, as you can see below, was very large relative to the other names in its space and showed very high velocity. The “tallness” means it was up most for the week which rounds out my midterm momentum trends.
I like to see standout momentum. If NFLX is, like the CEO says, the biggest distributor of online content that is a big deal. The stock was dead in the low 60’s in the fall and now is trading around $81 and change. The run-up before earnings is an ideal time to sell some out of the money put spreads in the July cycle. The name should keep this upward to even flow until they report on July 24, 2012. Usually the off-earnings cycle month experiences some volatility compression which should help the put spreads.
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