DLR just emerged from a confluence of moving averages
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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.
