Friday, July 13, 2012

NII Holdings (NIHD) in a capitulation sell-off; Netflix (NFLX) poised for another leg higher

A pair of alliterative NASDAQ-100 issues merit scrutiny this evening: the cryptically titled NII Holdings and the trader favorite Netflix.

The indices concluded the session in the unusual way of having their respective daily percentage changes be multiples of each other. The DJIA ended down 0.25%, the S&P slid 0.50%, and – you guessed it – the NASDAQ surrendered 0.75%. Ten year Treasuries declined to fresh record lows.

NIHD, then. The stock is a holding company for Latin American businesses operating under the Nextel (mobile telecommunications) brand. Notably, its chart is forming a stunning capitulation pattern on the daily candles view, as is apparent below.

NIHD, 4 y 1d
Does today’s low represent a buying opportunity? Powerful evidence on the affirmative side is that price action sliced below long-term (11-month) price channel support that was steeply downward sloping -- usually an indicator of capitulation and concomitant contrarian opportunity. Volume was also heavy, although about a half dozen sessions over the past 52 weeks had still greater turnover (and at a significantly higher value per share).

I, for one, am inclined to expect further lows, chiefly because bears squashed a nascent afternoon rally and brought the stock to new intraday lows in the final minutes of trade. Still, today’s accelerated selling suggests a short squeeze will come sooner rather than later.

Onward to Netflix. These pages made a bullish case for the shares ten days ago – and at a price a full 20 percent below today’s levels.

NFLX, 180 d 1h
Despite its recent steep ascent, NFLX looks poised to pop again. Looking at the above hourly candles chart, price action over the past week has generated a bull flag and today edged to a fresh two-month high. Somewhat significantly, the stock also just stepped across the resistance of a six month price channel – although the channel’s slicing through clear air for the last two months renders it less reliable.

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