NFLX is a solid company. But earnings disappointment dropped the stock like a rock from $572 all the way to $480. At this point my mean reversion mentality kicks in. If you look at the 2 support lines I have drawn, we have support at $483 and another one at $466. By the time NFLX dropped to $484, the nasty red candles had transitioned into a DOJI indicating that the downward momentum is losing steam. I had to make a decision based on my familiarity with NFLX and the fact that the downward momentum was dying down to put on this trade. Of course, with the stock market, there are no guarantees, so you have to use your best judgement based on the data currently available to you.

NFLX got stuck in a squeeze (or Consolidation phase) and whipsawed all througout our this trade. I had to literally wait until the last day of the expiration cycle to close it at a profit. If you are a paid member, you must know that I dislike holding trades so close to expiration, but sometimes you have to deal with this scenarios.