What a roller coaster ride this one has been. Since the original short entry on NFLX back at 186.90 back in mid-February, the stock dropped nearly 30 points down to a low of 159 just a couple of weeks ago and is now indicated to open about 30 points above the entry price (indicated around 216 right now in pre-market trading).
Those who have followed the RSOTC.com for a while might recall my strategy when caught on the wrong side of a gap, such a side-stepping what would have been a sizable loss on the HPQ long-trade back in November on a large news-induced gap down and closing that trade out for a nearly 17% profit less than a month later. My strategy and and logic behind it is simple: Either leave your hard stop-loss order (standing GTC cancel order) in place which assures that order will not only be filled but filled converted to a market order immediately at the open, along with a flood of other stop-loss and buy orders (which often causes a temporary over-reaction due to the order imbalances) -OR- cancel your standing stop-loss order and re-enter a new stop-loss order about 5-10 minutes after the opening bell. I’ll usually place the new order right above the post-opening reaction high. Therefore, if the stock continues to build on the opening gains throughout the day, I’m taken out at a price that probably wouldn’t have been much worse than had I left my stop in place at the open. However, like the HPQ long back in November, along with many other trades over the years, stocks often peak on good news (or bottom on bad news) and these large opening gaps can sometimes signal the end of the run (or plunge) for a stock before a lasting trend reversal.