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Pro Trader: Netflix Results Suggest Momentum Trade Ending

According to Fast trader Joe Terranova, Netflix earnings present the fundamental shift that could signal the beginning of the end of the momentum trade.

After parsing over the latest earnings results, which disappointed the Street, Terranova says “this may finally be the moment short sellers have been waiting for. Fundamentally you can look at these numbers and say the story has changed. The growth projections are now called into question.”

Looking at the numbers, the company said quarterly earnings rose to $68 million, or $1.26 a share, from $38 million, or 70 cents a share, in the period a year ago.

Revenue rose 52 percent to $788.6 million, but fell short of the average analyst estimate of $791.5 million, according to Thomson Reuters.

However, perhaps most noteworthy for traders, Netflix cautioned that it would add fewer U.S. subscribers in the third quarter than it did in the period in 2010 - that's what called growth into question.

In fact, Netflix estimates ending the third quarter with the same number -- or only slightly more -- subscribers as it had at the end of the second quarter. (The company blamed the development on a recent price hike, which investors took to mean that any new subscriber additions would be offset by customers canceling over the prospect of paying more for movie rentals.)

”These results show it’s costing more money to get subs in the door and they’re get fewer of them,” adds Option Monster Jon Najarian.

Looking at the technicals, trader Guy Adami is also concerned. He says if the stock breaks $250 then technical traders would consider the stock as broken. “I think that will empower the shorts,” he says.

Karen Finerman just can’t get excited about this stock – either from the long or short side. “I’d never be short,” she says. “There are too may factors at play.”









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Trader disclosure: On July 25, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (MS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Finerman's Firm And Finerman Own (AAPL); Finerman's Firm owns (BAC) leaps and Finerman Owns (BAC); Finerman's Firm owns (JPM) leaps and Finerman Owns (JPM); Finerman’s Firm owns (RIMM) puts; Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (MDY); Finerman's Firm Is Short (SPY); Finerman's Firm Is Long S&P 500 Puts; Finerman's Firm Is Long Russell 2000 Puts; Terranova owns (VRTS); Terranova owns (IBM); Terranova owns (FCX) ; Terranova owns (CVI); Terranova owns (XOM); Terranova owns (DIS); Terranova owns (WFM); Terranova owns (LULU); Terranova owns (MSFT); Terranova owns (TM); Terranova owns (JWN); Terranova owns (MCD); Terranova owns (PEP); Terranova owns (MA); Terranova owns (BX); Terranova owns (GS); Terranova owns (DAR); Terranova owns (CAT); Terranova owns (AAPL); Terranova owns (F); Jon Najarian owns (AAPL) call spreads:Jon Najarian owns (DANG) call spreads:Jon Najarian owns (CIGX) call spreads:Jon Najarian is short(NFLX) call and put spreads; Nations owns (SPY); Nations owns (MSFT); Nations (TBT) calls

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of Building Materials Holdings
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LHO)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of Sun Pharmaceutical Industries Ltd
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (RLI)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of Domino's Pizza UK & IRL PLC


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