DLR just emerged from a confluence of moving averages
Subscribers to Schaeffer's Weekend Trader options recommendation service received this DLR commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.
Real estate investment trust (REIT) Digital Realty Trust Inc (NYSE:DLR) has emerged from a confluence of its 20- and 100-day moving averages victorious. The breakout traces a trendline connecting August and October highs, with support amid broad market volatility at $115—the area of January 2023 closing highs. The shares’ February peak can now step up as support after a 5.5% post-earnings bull gap on Friday.
Short interest continues to roll over from summer highs, which typically indicates a bullish uptrend. Yet with short interest off 7.3% in the last month and a healthy 5.1% of the equity’s total available float sold short, there’s ample short squeeze potential.
In the options pits, the bought-to-open 115 strike served as support and now the 120-strike can do the same. Implied volatility (IV), meanwhile, is falling amid a post-earnings volatility crush and below 20-day historical volatility (HV). It's worth pointing out that DLR ranks high on the Schaeffer's Volatility Scorecard (SVS), with a score of 84 out of 100. This suggests the security exceeded option traders' volatility expectations in the past 12 months.
Our recommended January 19, 2024 call has a leverage ratio of 6.6, and will double on a 14.8 % rise in the underlying equity.
