Watching DDOG for a Call

DDOG looks interesting in a recent chart:

DDOG 60-min 11-24-23

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:

DDOG Weekly 11-24-23

…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.

DDOG 78-min 11-24-23

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…

DDOG Weekly 11-24-23 B

…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…

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