DataDog Moves Into the Buy Zone Ahead of Earnings

It is a huge week for earnings and technology names are right at the heart of the releases.

DataDog (DDOG) is one firm that has previously performed well post-earnings, which can provide a nice gain if you're playing options. The chart is bullish, so we would isolate on either buying calls or selling puts (or put spreads). The expected move post earnings for "the dog" is about $16, or roughly 10% of the price of the stock. That is pretty expensive this time around, so perhaps the market is expecting too much of a move, or perhaps not.

We see this stock making a move towards $185 and then $200 in the short term.

We have seen some heavy call volume bought on DataDog options recently, specifically the November 14 165 strike last week, well over 2,500 contracts bought totaling a cool $2.1 million. This, of course, could be hedging a short position, but that size is doubtful.

The chart shows a bullish cup/handle pattern that was broken to the upside last week on higher volume. On that same day, we witnessed strong call volume across several strikes in January and November.  

Let's look into a December call slightly out of the money on DataDog: the $165 strike which would cost $11.40 per contract. We would use a managed risk approach of normal size (whatever your risk tolerance is) if the stock moves up toward our target and we would consider selling an upside call or rolling up the current contract. Earnings are out before the open on November 6.

At the time of publication, Lang had a call position in DDOG.