2 Top Software Stocks Poised For Explosive Breakouts In 2020

Explosive breakout stocks

With strong market conditions the past few months, traders remain focused on the long side as we enter the upcoming earnings season.  In this post, we show you two top software stocks with explosive potential that have not yet broken out from their bases.

Datadog (DDOG) – Cloud Monitoring

$DDOG logo

 Datadog (DDOG) is a recent software IPO from September of 2019, so there is no need to first consult a weekly or monthly chart as we normally do.

DDOG lacks earnings growth, but has three straight quarters of impressive sales growth: +76%, +82%, and +88%. Such impressive revenue growth puts this stock on the radar of hedge funds, mutual funds, and other institutions. 

DDOG is a “liquid mover,” meaning it is an actively traded stock with a big ATR (average true range). These types of stocks can produce extremely explosive breakouts, especially in stocks with a low float.

Datadog trades an average of 2.3 million shares per day, with a float of 27 million shares. That means DDOG trades its entire float in roughly 12 sessions, making it an extremely fast mover. 

The potential breakout setup is shown on the daily chart of DDOG below:

$DDOG daily

Please reference the following annotations on the chart above:

     1 – This point shows the false breakout to new highs in November, which was followed by a pullback and filling of the gap up in early December.

     2 – Although the price dipped below the 50-day moving average several times, DDOG clearly found solid support in December. This allowed the price to form valid basing pattern (press here for a quick primer on basing patterns). 

DDOG ripped through resistance at $39 last week, and has since formed an extremely tight trading range on lighter volume–generally a bullish signal.

From here, we expect the stock to follow one of two potential scenarios (labeled as “A” and “B” on the chart):

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Disclaimer: Past results are not necessarily indicative of future results. There is a high degree of risk for substantial losses in trading securities. All data and material on this website and/or ...

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