by Sam Collins | July 11, 2012 1:56 am
Akamai Technologies (NASDAQ:AKAM) – This has been a favorite of the Trade of the Day since Oct. 31, 2011, when I recommended the stock at $27 and it then ran to almost $40. But when the company missed its Q1 earnings estimates and announced the retirement of its CEO, I recommended selling it on April 26 at the market (around $33).
At that time, I also said, “As you can see from last night’s trading [AKAM had closed at $39.76 the day before], this is a very volatile technology stock, so a pullback to the low $30s might be a place to reinstate new positions.”
But despite positive reports from several research analysts, the stock fell below $26 and failed to hold above its 200-day moving average on a bounce. This failure confirmed that a huge-double top, which is a variation of a head-and-shoulders top, is in place.
And there are more technical negatives. Last week, the 50-day moving average crossed down through the 200-day moving average (death cross). And recent Nasdaq reports show that insiders have been sellers by a ratio of 3-to-1 during the past three months.
Investors should sell AKAM if they own it. Traders should short it at $30 with a target of $20, although it could get some support at $26. A stop-loss should be placed at $32 to protect against a reversal. Check with your broker for any special short-sale restrictions.
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