Datadog, Inc. (NASDAQ: DDOG) seems to be poised for a price surge as per its latest charts. The company operates an observability and security platform for cloud applications in North America and internationally.
The stock was also a part of our recent watchlist for breakout stocks.
Bullish Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past few weeks. These are marked as purple color lines. The stock currently looks poised for a breakout from the falling wedge pattern. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term.
DDOG – Daily Chart
#2 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#3 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below the –DI and +DI lines. This indicates possible bullishness.
#4 Bullish Stoch: The %K line is above the %D line of the stochastic in the daily chart, indicating possible bullishness.
#5 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a resistance-turned-support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher.
DDOG – Weekly Chart
#6 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well, and is also moving higher from oversold levels. This is a possible bullish indication.
#7 Bullish MACD: The MACD line is above the MACD signal line in the weekly chart as well, indicating bullishness.
#8 Bullish RSI: In the weekly chart, the RSI is currently nearing 50 and moving higher. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase shares of DDOG above the price of around $71.
TP: Our target prices are $77 and $82 in the next 3-6 months.
SL: To limit risk, place stop-loss at $67.50. Note that the stop-loss is on a closing basis.
Our target potential upside is 8% to 15% in the next 3 to 6 months.
For a risk of $3.50, our target rewards are $6.00 and $11.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
Tara
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