For investors using technical analysis to find possible trades, the search usually centers on two main points: which stock is in a good trend, and when is the suitable moment to enter that trend? A methodical way to answer these points involves looking for stocks that show both good technical condition and a distinct, usable price formation. This process centers on locating securities that are in a verified uptrend and also moving in a narrow band, hinting a possible breakout may be near. By joining a high technical score with a high setup quality rating, traders try to find instances where a stock's existing force is ready to change into a new upward phase.
AKAMAI TECHNOLOGIES INC (NASDAQ:AKAM) recently appeared from such a search, showing a profile that technical investors may find interesting. The cloud and security company's stock displays the signs of a possible breakout candidate when examined through this two-part model.
Looking at the Technical Base
The first part of this plan is finding a stock with good basic technicals, which hints a lasting trend is active. Based on the full ChartMill Technical Report, AKAM gets a good Technical Rating of 8 out of 10. This number measures the stock's total technical condition by studying several time periods and measures compared to the wider market.
Main points adding to this rating are:
- Good Trend Agreement: Both the near-term and longer-term trends for AKAM are scored as good. This agreement across time periods is a solid bullish sign, showing momentum is not a short-term occurrence but part of a bigger planned move.
- Good Moving Average Backing: The stock is priced above all its main simple moving averages (20, 50, 100, and 200-day), and each of these averages is itself in an upward pattern. This layered, upward support formation is a standard trait of a sound uptrend.
- Steady Results: While the report mentions AKAM is a "medium performer" compared to the whole market over the last year, it has done much better than its IT Services industry group, doing better than 64% of them. Its recent three-month result of about 16% more shows its positive momentum.
A high technical rating is important for the plan because it sorts for stocks with confirmed momentum, raising the chance that a breakout, if it happens, will continue instead of quickly turning around.
Judging the Setup Quality
The second key point deals with timing. A stock can be in a good uptrend but be stretched, giving a poor risk-reward entry. This is where the Setup Quality Rating becomes key. AKAM gets a very good 9 out of 10 on this measure, showing a high-grade consolidation formation.
The setup examination shows a stock that has been tightening, which often comes before a directional move:
- Consolidation and Lower Volatility: The report says that prices have been consolidating recently with lower volatility. AKAM has been trading in a band between about $82.70 and $91.00 over the last month and is now placed in the middle of this band. This coiling action builds pressure and sets clear support and resistance points.
- Set Support and Resistance: The technical analysis finds a clear support area between $86.26 and $88.28, made by a meeting of trendlines and moving averages. Just above the current price sits a set resistance area between $89.52 and $90.71. These clear points allow for exact trade planning.
- Supportive Signs: A recent "Pocket Pivot" sign was seen, a volume-based formation that often shows accumulation by big investors, adding another piece of positive confirmation to the setup.
A high setup rating is important as it finds moments where a trending stock is resting, giving a lower-risk entry point with a well-set area for a stop-loss order, just under the support zone.
A Possible Breakout Situation
Bringing these two ratings together, the examination proposes a specific trading situation. The resistance zone starting at $89.52 is the immediate barrier. A clear move above this zone, specifically above $90.72, could signal the beginning of a new breakout stage, giving a possible entry point. The nearby support zone gives a sensible area to place a protective stop-loss order, for example, below $86.25, which would set the trade's risk.
This ordered method, waiting for a technically sound stock to finish a tight consolidation and then break above resistance, tries to match a trader's entry with the restart of the basic trend.
Find New Technical Chances Daily The search that found AKAM as a candidate is run each day to find new setups in a changing market. You can view the present list of possible breakout stocks by going to the Technical Breakout Setups screen.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer or request to buy or sell any securities. The examination shown is based on technical measures and automated reports at a certain time. All trading and investment choices involve risk, and you should do your own study and talk with a qualified financial advisor before making any choices. Past results are not a guide for future results.
