This doesn’t always happen, but sometimes the indicator and chart signals coincide to convey a powerful message. Datadog (DDOG) has a confirmed bullish reversal on the price chart and a trend signal from the trend composite. Today’s article will examine these signals and highlight an evolving short-term pattern.
The chart below shows Datadog with a confirmed bullish reversal pattern. First, DDOG formed two lows in the low 60’s for a double bottom (green lines). These lows represent an area of demand (support) in the lower 60’s. The peak between these two lows marks overhead supply (resistance). Demand outweighed supply as the stock surged above the red resistance line.
The indicator window shows that the trend composite turns positive just before the breakout of the double bottom. The trend composite summarizes signals in five trend-following indicators. It climbed to +5, which means all five indicators are bullish. This signal reverses the bearish signal from March 7, 2022.
Given the long-term uptrend, now is the time to look for tradable pullbacks or short-term oversold conditions. The next chart shows the broken resistance at 90 (red line) turning into support (green line). This is a classic tenet of technical analysis. A price breaks the resistance and demand exceeds supply. The previous excess supply becomes an area of demand (support).
DDOG made the breakthrough in June with a pennant. This is a short-term bullish continuation pattern that depends on the previous move for directional distortion. The previous move was up (early May to early June) so this is a bullish continuation pattern. A breakout here would be bullish. Barring a breakout, chartists can watch for the Momentum Composite to move to -3 or lower to signal a near-term oversold condition.
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Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. With his primary focus on US stocks and ETFs, his systematic approach to identifying trends, finding signals within trends, and setting key price levels has made him a valued market technician. Arthur has written articles for numerous financial publications including Barrons And Stock and commodity magazine. In addition to his Chartered Market Technician (CMT) distinction, he holds an MBA from Cass Business School, City University, London.
