Datadog's Ascent: A Pre-Earnings Momentum Play
Understanding Datadog's Recent Market Performance
Datadog Inc. (NASDAQ:DDOG) has seen its stock price climb, with a notable 2% increase in trading activity, pushing it to its highest valuation since December. The company's shares have already appreciated by 5.6% this year and boasted an impressive 36.4% growth compared to the previous year. This cloud software provider is gearing up to release its first-quarter earnings report before the market opens on Thursday, May 7th, with strong indicators pointing towards continued positive performance.
The Significance of the 80-Day Moving Average Crossover
A crucial technical signal for DDOG is its recent cross above the 80-day moving average. Historical data from Schaeffer's Senior Quantitative Analyst Rocky White indicates that this specific event has occurred six times in the past decade. Following these instances, the stock consistently showed an upward trajectory a month later in 83% of cases, averaging a substantial 17.5% increase. Should this pattern repeat, DDOG's share price could approach $170, a level not seen since November.
Historical Earnings Reactions and Future Expectations
Datadog has a track record of positive market reactions following its earnings announcements, with five out of its last eight reports resulting in share price gains. Notably, the stock surged by 23.1% in November and 13.7% in February after previous earnings disclosures. On average, the shares have experienced an 8% swing the day after earnings, irrespective of the direction. However, options traders are currently anticipating an even larger movement, pricing in an 18% fluctuation for the upcoming report.
Options Market Activity and Volatility Insights
In anticipation of the earnings release, options trading for Datadog has been notably active. More than 10,000 put options have been traded today, doubling the typical volume for this period. The January 15, 2027 125-strike put is currently the most traded contract, with new positions being opened through selling. Furthermore, DDOG's Schaeffer's Volatility Scorecard (SVS) stands at an impressive 93 out of 100, indicating that the stock has consistently exhibited higher volatility than its options market has predicted over the past year.