There's a strong rally going on today in the previously beaten up momentum stock names. It actually started yesterday, and it is seeing some follow through today. My take is that this is a bear market bounce in many of these names and that, at this point, it is an opportunity to short the stocks after a rally (with a certain number of those names being more bullish exceptions).
Take Netflix (NASDAQ:NFLX), for example. The stock appears to me to be in the midst of a breakdown out of a Head & Shoulders topping formation with an ultimate downside target in the $250 range. Today's rally appears to me to be the "c" leg of a short-term "abc" upside correction within that overall bearish chart. I'd be fading this rally in anticipation of a continued move down to the projected downside target range. I would, however, use $340.19 (the 50% retrace of the April 22 to April 28 sell-off) as a backstop for any shorts.
Netflix Head & Shoulders Chart:
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Bearish Netflix Chart
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