DDOG looks interesting in a recent chart:
After a huge earnings report and guidance they gapped up big on 11/7 then kept trading up. They have been consolidating for a little more than a week. The horizontal line at the very top is the breakout level.
But then if you pull back to a weekly chart:
…you can see that the same horizontal line just about frames a negative head and shoulders. Now, I don’t really rely much on head and shoulders, but if this one plays out then the projected rise in the long term would be to around 200 or a new all time high.
That said, I would not try to do an option play on a head and shoulders because that is a more long term pattern and options plays are going to be intrinsically shorter term because of expiration limits. But if DDOG is headed eventually to 200, then a shorter term move to 120 or 130 might not be so hard to believe. Markets closed early today, so we would be looking at a possible Monday play on options. For a longer term play, one could simply buy the stock for a possible 78% gain (from 112 to 200).
Looking at DDOG again, I am now thinking that we may have at least a slight pull back for a better (more profitable) entry. The following is a 78-minute chart. I sometimes like to look at 78 minutes because it gives you even bars for the 6.5 hour (390 minutes) day.
On this chart we have negative divergences on the oscillators indicating a possible reversal downward. I believe that the 113+ resistance looks pretty strong based on the weekly chart I posted before. If we get a reversal, which we may not, it might decide to breakout and rally strong, then the question is how far might DDOG go down before meeting support? Looking at recent trading activity, I believe that we have a more crowded range between around 108.5 and 109.5. The more traders that you have for whom a number or range has meaning the more support and resistance you are likely to have. These two lines have been added to the chart along with the existing 113+ line.
Going back to the weekly chart…
…I believe that the 108-109 range shows support going back to the summer 2022 period. The thing that worries me about a bull call play is that the weekly chart also shows an oscillator negative divergence which could mean that there might be a much longer term negative reversal. The thing is that this negative divergence is 2-pt and if we have a strong rally any time soon (next couple-few weeks) then the divergence would just be erased from the weekly chart.
So currently I am leaning towards looking for pullback to around 108-109 before possibly entering a bull trade. Of course, that is not necessarily to say that I will actually be around to do the trade, but we’ll see…