Digital Realty Trust, Inc., a real estate investment trust (REIT), through its controlling interest in Digital Realty Trust, L.P., engages in the ownership, acquisition, development, redevelopment, and management of technology-related real estate. It focuses on strategically located properties containing applications and operations critical to the day-to-day operations of technology industry tenants and corporate enterprise datacenter users, including the information technology departments of Fortune 1000 companies, and financial services companies. The company’s property portfolio consists of Internet gateway properties, corporate datacenter properties, technology manufacturing properties, and regional or national offices of technology companies.
To review Digital’s stock, please take a look at the 1-year chart of DLR (Digital Realty Trust, Inc.) below with my added notations:
DLR has formed a very clear down-channel chart pattern over the last (10) months. A channel is simply formed through the combination of a trend line support that runs parallel to a trend line resistance. When it comes to channels, remember that any (3) points can start the channel, but a 4th point or more confirms it. You can see that DLR has several points of channel resistance (red) and support (blue). If you look back in October you can see that the stock has already failed to breakout once before.
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The Tale of the Tape: DLR has formed a common pattern known as a channel, in this case a down channel, and has broken through its resistance. A long trade can be entered on a pullback to the previous channel resistance, which currently sits near $50. A short trade should be considered if the stock falls back inside its channel like what occurred in October.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach