Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.
Netflix, Inc. (NASDAQ: NFLX) shares were trading sharply lower by $16.00 (3.5 percent) at $422.40 in Monday's session. The catalyst for the decline is a downgrade at Evercore from Hold to Sell. In addition, the firm lowered its price target from $450.00 to $380.00.
The timing of the downgrade could not have come at a worse time for shorter-term traders long the issue. After a weak day on Friday, with Netflix not responding to a late day bounce in the market, traders may have taken the issue home long overnight, banking on the issue playing catch-up with the market in Monday's session. With the market continuing to rally in the premarket, these same traders may have been content to ride out the downgrade.
However, the weakness in the premarket continued into the regular session. The downgrade instigated a sharply lower open -- Friday's close of $438.40 vs. today's open of $430.83, which currently stands as the high for the day. Since the open, it has continued lower and now its attempting to find support at $421.67.
If the decline continues, there is no identifiable support until its January 22 low ($404.80), which represents the low from the session following its huge Q4 beat.
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