Sunday, December 05, 2010

Notable Calls Network (NCN): Netflix (NASDAQ:NFLX)

I haven't done this for quite a while, so I thought to share nice a trade we had on the Notable Calls Network (NCN) last Friday.

The network nowadays is 100+ strong with professional members of the buy & sell side represented. We share the daily trading flow: analyst calls, news, insight & analysis etc. NCN is about having 100+ extra pairs of eyes & ears out there.

Fridays in December are usually fairly quiet but this was not the case last week. The day was packed with some pretty good action. Here's an example:

- Around 11:30 AM ET a seasoned NCN member pinged me with the following:

HEARING - StreetInsider has confirmed that another noted short seller, Manuel Asensio, will be talking about Netflix, Inc. (Nasdaq: NFLX) on CNBC's on Strategy Session this afternoon.,

Normally, I would have filed this under the 'not-actionable-but-good-to-know' category & moved on. But not this time. This time I knew it would be acionable. Here's why:

1) The CANDIES, a group of high momentum names had started to underperform over the past several days. Netflix (NFLX) among them. I had highlighted a rather interesting Chipotle (CMG) downgrade from Morgan Stanley the same morning and that trade was working well. There was clearly selling pressure on the recent momentum group.

2) Manuel Asensio is one of the best known members of the (shrinking) short-only cabal. Smart and agressive, he is usually not the type of guy people want to bet against. It was pretty clear his comments would send Netflix (NFLX) stock into a free-fall.

I quickly distributed the call to other NCN members.

As you can see from the chart below once the call started making rounds the stock didn't look back. By the time Asensio came on around 12:25 PM ET the stock was already down 5 pts. Needless to say, liquidity wasn't an issue. You could have easily hit the stock with a 20K order and get filled.

Asensio didn't hold any punches, calling the stock 4-5 times overvalued with unreasonable expectations. He did what he was expected to do.

The stock actually bounced 1.5 pts right after Asensio came on - a classic sell-the-rumour-buy-the-news reaction if you will. The stock did end up a cpl of pts lower by end of day but that was hardly tradable.

This is how Notable Calls Network (NCN) works - sharing the flow. We catch them every day.

Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

- Access to quality research/analyst commentary

- Ability to generate and share (intraday) trading calls

I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.

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