As expected, the fire that broke out yesterday in Netflix (NFLX) two days ago after closing, placed pressure on the NASDAQ as yesterday’s trading kicked off. Traders battered 4-letter stocks with the sounding of the opening bell, but it very quickly became apparent that things were set to change. A wave of strong demand dragged Netflix and Amazon (AMZN) from the drudges, sparking a rally on the NASDAQ. The video streaming company, NFLX, saw strong and determined movement throughout the day, offsetting more than half of its losses at the opening. The stock ended off 5.24%. In parallel, a number of tech companies rallied to all-time highs.
The movement on NFLX provided daytraders with a lot of opportunities. For similar events in the future, it’s important to remember the elements at play that created the impressive comeback in NFLX. First off, a disappointing report based on the number of new subscribers, but in tandem, an earnings beat. A hot stock, investors’ hopes sky-high, which falls short of lofty targets, is punished at the opening, offering sharp and shrewd investors narrow yet fantastic entry points. Remember that about other Wall Street favorites like Facebook (FB), Tesla (TSLA), and Apple (AAPL) when their turn comes to report.
The bullish tone on Wall Street showed itself yet again. Despite negative headlines from NFLX, the indexes ended with nice gain. That’s the first time in a number of weeks that we saw a negative gap at the opening that was met by aggressive buying. Obviously, that’s a rather positive signal.
Alongside NFLX, we got the financial results of Goldman Sachs (GS) before the opening bell. The numbers were very good, but the stock traded down. At the same time, the stock corrected most of the damage in the last 2 trading hours, ending lightly off by just 0.18%. We expect the stock to rally until the end of the week, like most banks did after reporting their earnings results.
In economic news, investors focused on the speech of Fed Chair, Jerome Powell, who provided all of the answers we wanted to hear. Inflation is under control, economic growth looks just fine, the trade war isn’t really a problem, and the tax cut has propelled the economy.
The indexes seem to be in a good technical state. The bearish claims that seemed so convincing when the trade war broke out seem now more like desperate pleas on the part of the beaten-down naysayers.
In Summary: We expect more days like yesterday over the coming weeks. Negative gaps are expected to close very quickly, with the market very quickly digesting earnings reports, and moving on to the next stage. Likewise, we expect a similar pattern in so far as reporting companies go. Sales as the numbers are released, the smart money then coming in to buy up shares when they bottom. There are no big names which will be reporting today. The real fun continues later in the week!
Have a great trading day!
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