Nasdaq
华尔街日报Stock Of The Day: Is Datadog About To Move Higher?
Shares of Datadog, Inc. (NASDAQ:DDOG) are little changed on Wednesday. They have been trading lower since reporting earnings in November.
But the stage may be set for a reversal. The shares are oversold and at a possible support level. This is why we have made Datadog our Stock of the Day.
Many trading strategies are based on the concept of reversion to the mean. If a stock gets overextended in one direction, traders will enter the market anticipating a move in the opposite direction.
Most of the time, a stock stays within its normal or average trading range. But not always.
If buyers become emotional and aggressive, they can push the shares above this range. When this happens, traders say the stock is overbought. Some will enter the market as sellers, expecting a reversion to the mean or a move lower.
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The opposite is true if sellers become emotional and aggressive.
They can push the price below the normal range. Traders will say it's oversold.
This will attract buyers, as they expect a reversal or a move higher. Their buying can force the shares upwards and become a self-fulfilling prophecy.
There are various tools traders can use to determine whether a stock is overbought or oversold. One of them is the Relative Strength Index (RSI). It is on the bottom part of the chart.
If the blue line is below the horizontal red line, it indicates oversold conditions. As you can see, that's the case now. This could draw buyers in.
Datadog is also at a possible support level.
Some of the people who sold shares at around $140.50 in September regretted it when the price rose. Some vowed to buy their shares back if they could eventually do so at the same price they were sold for.
Now that Datadog has dropped back to this level, they are placing buy orders, and this has created support.
This combination of being oversold while at support means there's a good chance the stock reverses and rallies.
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