Last weekend, I wrote about staying calm when markets get rough and sticking to the rules. On Wednesday, I wrote about waiting for the right entry in Kinross Gold. Both came back to the same idea: cash gives you options, and every share in the portfolio has to earn its place.
That sounds easy enough when you're looking at a watchlist. It's a different story when it's a share you've owned for years.
And here's the awkward part. Only a few days ago, we were talking positively about Netflix. Now my system has flagged it for a sell, and I'll be exiting the position on Monday!
The chart still gives me reasons to hope for a bounce, so I'm not particularly happy about selling here. But the rules are there for a reason. I can't praise the system when it tells me what I want to hear and ignore it when it doesn't.
Last weekend, I asked why I had sold Nike but was still holding Netflix. At the time, I believed Netflix had a reasonable chance of recovering, and I wanted to give the position more room to play out. This week, though, new information came to light. Netflix's latest results and outlook raised fresh questions, while the share price continued to weaken. My system flagged the need to reassess the position, and after looking at the evidence again, I've decided to sell on Monday.
That’s a decision about my own portfolio, not a call for anyone else to buy or sell Netflix.
I still think Netflix is a good business, but that doesn't mean I have to keep owning the shares. I was hoping the chart would give us a bounce from here, and it still might. But my system has flagged a sell, so that's what I'll do on Monday. It may turn out to be the wrong call, but there's not much point having a system if I only follow it when I agree with it.
The technical picture is part of why this has been difficult.
The price is nearing an area where I see several technical factors coming together. If it tests that confluence zone (50% ATL to ATH, and 61.8% most recent low in 2022 to ATH), it may find support.
But it could also wick down further towards support at $55. A possible bounce is one outcome; it isn’t a guarantee.
There’s a deeper downside scenario on my chart as well. If this is an ABC correction and wave C is about the same length as wave A, the projection points to the $50 region which lines up perfectly with the main 61.8% ATL to ATH. It’s a scenario, not a prediction, but it shows how far the price could fall if the correction continues.
The longer-term chart worries me too. Netflix has been rejected by the 50-month EMA, and is now between it and the 200-month EMA, with very little nearby support. To me, that leaves the share in mid-air between two important long-term reference points.
NFLX Monthly chart
I’ve weighed the possibility of a bounce against the chance of a deeper fall, the longer-term chart and my own rules. I’ve decided to sell on Monday. I may be leaving a bounce on the table. I’m willing to accept that rather than keep holding just because selling at a loss is hard.
The rules are easy to like until they cost you money
It’s straightforward to talk about discipline when the portfolio is rising. The real test comes when a share keeps falling and you start looking for reasons to give it more time.
This has been a difficult stretch for parts of the portfolio. CoreWeave and Rivian have been sold, and Rocket Lab has been trimmed. Those decisions were based on the conditions I’d set for each position, not on a single rule that treats every falling share the same way.
CoreWeave and Rivian met the conditions for full exits. Rocket Lab was different: I trimmed half while the share remained above my weekly stop. The plan called for reducing the position and setting a stop on the rest.
My trigger rule is straightforward: one trigger means review and a defined grace period; two mean reduce risk; three mean exit. The grace period applies when only one trigger is active. It doesn’t override a higher trigger count.
The point isn’t to avoid every loss. That’s impossible. It’s to avoid turning a manageable loss into a bigger problem by moving the goalposts. Changing my mind doesn’t mean every earlier decision was foolish. Refusing to reconsider when the evidence or my own assessment changes can be more costly.
Cash gives me room to wait
The sales and trim have freed up cash, but I don’t need to rush it into something else. As I wrote on Wednesday about Kinross, I’m waiting for the price to reach my planned area and for the chart to support the setup.
Cash isn’t a prediction about what markets will do next. It gives me the choice to wait. A share falling towards a level I’m watching doesn’t make it an automatic buy; I still need to consider the business, the risks and whether the price action fits my plan.
There’s no prize for being first to buy a falling share. I’d rather miss an entry than feel obliged to act simply because something has become cheaper.
What comes next?
The good news is that we're not short of ideas. Our watchlist remains healthy, with plenty of companies worth watching as the market works through its current uncertainty. Among them are Micron (MU), Constellation Energy (CEG), Kinross Gold (KGC), Broadcom (AVGO), Eli Lilly (LLY), Nvidia (NVDA), Lumentum (LITE), CrowdStrike (CRWD), Lam Research (LRCX), Vertiv (VRT), Marvell (MRVL) and the South Korean market ETF (EWY), to name a few.
Some are caught up in the recent tech sell-off, while others give us exposure to different parts of the market. They won't all become buys, and a falling share price doesn't automatically make a stock cheap. We know what interests us, we have an idea of what we'd like to pay, and we can wait for the right opportunity rather than feeling we have to do something with every dollar of cash.
Next week, Alphabet reports its results. As always, I'll be looking at both the numbers and the market's reaction. Good results don't guarantee a rising share price, just as disappointing results don't necessarily mean a business has lost its way.
For now, I'll stick to the plan, keep some cash available and wait for the right opportunities. Selling a share is never particularly satisfying, especially when you can still see reasons it might recover. But there will be other opportunities, and there's no need to rush into the next trade.
Have a great rest of the weekend.
The Slow Capitalist is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice. The views are my own. Investing involves risk, including the possible loss of your principal. Consider your own circumstances and risk tolerance, and speak with a qualified professional before making investment decisions. I may hold positions in the securities discussed.