NFLX Trade: How We Walked Away With A 140% Gain

Some of the best strategies are often the ones that keep things simple. Our recent Netflix (NFLX) trade is a great example of a winning trade based on simple market principles.

That is the hallmark of my coaching service, The Profit Machine, where I break trading down to its simplest form.

I explain to all my students that they don’t need dozens of fancy indicators to be successful traders. Sure, some of these patterns and tools can be effective, but real, consistent, and long-term success is built on trade setups that can give us attractive risk vs. reward profiles.

Breaking Down Our Winning NFLX Trade

Today, I’ll show you exactly how I found this NFLX trade. I’ll also break it down step by step so that you can see how effective this strategy is for yourself.

Our first step in our top-down strategy is looking at the broader market. Is it currently trending up or down?

To find out, I started by pulling up the chart for SPY, which closely tracks the S&P 500, as seen below.

Here I found the support line (yellow) from the last time SPY traded at this level, which was back in October 2021. Once I identified my support, I looked to see if prices had bounced off it or fallen through. As you can see, we bounced back to the upside. That was a bullish move for the market, called a positive momentum divergence. SPY looked bullish.

But that is just one index. Next, I needed to look elsewhere to confirm this bullish sentiment…

The Russell 2000 had been having a tough go for a little bit after breaking below $2,100, a key level highlighted by the green line.

After cracking through this level, RUT saw a few days of choppy trading before staging a comeback in bulls’ favor.

Finally, I checked out the CBOE Volatility Index (VIX). There, I found the third piece of evidence I wanted to see… a “sell” signal on the VIX, which is a “buy” signal for the broader market.

These three pieces of evidence — positive momentum in SPY, a comeback in RUT, and a “sell” signal on VIX — are what I needed to back our bullish view on the broader market.

My next step was to look for a stock that had an attractive risk/reward opportunity for us, which brought me to our NFLX trade.

NFLX had seen a substantial decline after its most recent earnings report, but it fell into a previously defined support zone, which you can see below.

Once we had a positive momentum divergence, we used this support zone to determine where we thought our price could end up moving to. To determine this, I looked at NFLX’s historical action to find how the price acted when previously trading in this range.

At the time that I made this trade, NFLX was trading around $450.

I knew that NFLX’s past breakdown level was right around the $460 mark. This looked like a reasonable strike price for long call options. At this level, the risk/reward profile meant that our $1.60 call options could be worth upward of $9 – $10 should the stock take back that $460 price.

When the stock made its move, I told my students to set a stop loss to lock in our profits. In the end, we walked away with a 140% gain from our NFLX trade.

For the full breakdown of the trade check out the video at the end of this article.

Join My Weekly Coaching Call For More Trades Like This

In The Profit Machine, we’re using strategies just like this to find picks like this NFLX trade. Simple, yet effective trades that anyone can make money on.

The best part? The Profit Machine is much more of a coaching call than it is me simply recommending trades. In other words, we discuss trades and we go in on them together. No more second guessing yourself.

That is what makes this a dynamic call. Not only are my students learning and getting their questions answered, they’re making money doing it.

So join us every Tuesday at 9 a.m. Eastern, and get in on the action…

Hope to see you there!