Akamai Technologies (AKAM) has been on a tear lately and is now on the verge of breaking out of a near two-year base. The company, which specializes in technology relating to streaming video but generally provides services that accelerate delivery of content and applications over the Internet, crushed earnings last week and shares surged as a result.
The future seems pretty bright for AKAM, as HD video adoption has taken hold more rapidly than expected and streaming video is finally really going mainstream. The company has also yet to see much benefit from foreign markets, which is likely to change in the coming quarters. I was particularly impressed by how well shares held up on Friday after gapping up hugely on Thursday.
Friday’s relative strength tells us that institutions truly believe in the story behind AKAM and likely intend to hold onto the share they picked up on Thursday. (NOTE: Just as a reminder, institutions make up around 75% of daily trading volume, so when they’re buying, you’re buying, because they’re the ones who are actually moving the market higher). Still, due to the fact that the market is getting a little shaky, combined with AKAM’s huge up-week, I would recommend waiting for a handle to develop on the two-year base you see above. The current buy-point sits at $41 on the nose ($0.10 above the high of the base).
If AKAM happens to push right through $41 without developing any kind of handle, then I would wait for shares to come back and re-test the breakout. So, either way, the initial buy-point is $41. The variable here is whether shares (a) immediately begin forming a handle (which should last at least a couple weeks), allowing us to buy on a breakout through $41, or (b) breakout immediately, allowing us to open up a position on a pullback to $41. As you can see, there’s not much resistance all the way up into the $50’s, so this could potentially be a nice trade.
This is a free sneak peek from our new Tech Cheat Sheet Premium service. Simply click here if you are interested in a free copy of the entire May issue.