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A Chip Off the Old Block: Netflix and the Law of Vibration in Action

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The market turns on a dime, but most traders cannot.
Did something fundamentally change in Netflix (NASDAQ:NFLX) the company yesterday? No, but something surely changed in Netflix the stock.
On Monday after the bell, Netflix reported strong earnings, and the stock followed suit with a huge gap opening on Tuesday.
However, it was all downhill from there as Netflix skidded from an opening print high of 389 to around $314 after the bell when the suspicions that billionaire activist investor Carl Icahn had been selling were borne out as he tweeted:
“Sold block of Netflix today. Wish to thank Reed Hastings, Ted Sarandos, Netflix team, and last but not least Kevin Spacey.”
Kevin Spacey of course was the star of the House of Cards hit that Netflix did so well with.

Click to enlarge
Netflix's own one-day House of Cards and reversal of fortune was a kind of one-two punch.
On Tuesday morning, CEO Hastings stated:

“We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.”
The apologia was not lost on investors as the bloom came off the rose quicker than, well, a tweet.
Forty-five minutes after the open we sent a note titled "Purple Haze." See here.
Can you say self-fulfilling? What is it they say about looking gift stocks in the mouth?
Hastings tone took the steam out of the go-go stocks across the board yesterday.
Given Tuesday’s large range "tail" in Netflix, it looks like it could be a long time before those who chased the open will see the light of day.
The reversal in Netflix underscores one thing: regardless of what a stock's fundamentals may or may not be, it is psychology and supply and demand of both shares AND emotions that drive a stock's price.
At the end of the day, it is mechanics and metrics behind supply and demand, practically speaking, as to shares and the supply and demand as to the emotions underpinning a stock that determine its ups and downs. Earnings may be a rationale for the buying and the selling of a name, but stocks always get over-valued and under-valued. P/E ratios expand and contract along with what investors are willing to pay for those earnings based on MOOD.
Carl Icahn has shown that he is not only a master of being able to identify value and squeezing it out of a situation, but also that he is a master stock operator in the spirit of Jesse Livermore. He knows how to feed the ducks when they’re quacking. He didn’t wait for a change in the fortunes of Netflix. He sold based on psychology -- thanking players for the ride.
I can’t help but wonder if Reed Hastings comments would have been different if he had a hint that Icahn was going to unload a block of stock.
I can’t help but wonder whether Hastings comment instigated or stimulated Icahn’s selling.
I mean do you want to own the shares of a company whose CEO is "apologizing" for its meteoric ascent?
10-min Netflix Chart:

Daily Netflix Chart:

Weekly Netflix Chart:

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POSITION:  No positions in stocks mentioned.