Computer software firm Akamai Technologies Inc. (NASDAQ:AKAM), thanks to its underperformance year-to-date, has arrived at a critical point on the charts. Most broader U.S. and European equity indices remain at or well above their uptrend lines from last summer. The stock price of Akamai, however, broke said uptrend long ago and in mid-March even slightly slid below its longer-standing uptrend dating back to October 2011. The stock has since been churning right below this uptrend.
The 18-month chart below also shows the stock’s 200 day simple moving average, which over the past twelve months has acted as a good indicator of the lower end of the stock’s trading range. With the stock currently trading below this mark, coupled with the June uptrend, at the margin odds favor a move higher. As a trader, however, I am more concerned with the scenario of ‘what if’ support doesn’t hold, and that is where in this particular case I see an even juicier trade potentially setting up.
If I draw a simple support line dating back to mid 2012, a level around the $34.25 mark becomes apparently important. This level also coincides with bottom of the narrow trading range in which the stock has been slopping back and forth since it marginally broke below its October 2011 up-trend in early March. The trading range could also be defined as a bear flag pattern, which traditionally resolves to the downside. As such the area near $34.25 serves as important support on multiple time frames.
In order not to fall into the nasty depths of analysis paralysis, the simple and clear takeaway from the charts of Akamai Technologies is this: buying a breakout above $35.60 and shorting a breakdown below $34.25 are the high probability trades currently available to swing traders. Traders could also use at-the-money options on a breakout in either direction.