For investors who use charts and price action to guide their choices, the search for good prospects often means finding stocks that show solid technical behavior and are ready for a price change. One organized way to do this is with a technical breakout screen, which finds stocks showing a firm basic trend while also trading in a narrow pattern. This technique tries to join the momentum of a stock as it leaves a quiet period, with the goal of being part of its next upward move. A recent check using this idea has pointed to Akamai Technologies Inc (NASDAQ:AKAM) as a stock needing more study from a technical view.
A Base of Technical Health
The first part of a good breakout formation is a solid and good basic trend. A stock in a clear upward trend is more probable to keep rising after a quiet phase than one falling or moving without direction. Akamai’s technical picture, as shown in its ChartMill Technical Analysis report, shows very good health on this point.
The report gives AKAM a top Technical Rating of 10 out of 10, a number that measures the overall condition of a stock’s price action. This high rating is backed by several important points:
- Both the long-term and short-term trends for AKAM are marked as good.
- The stock is priced above all its main moving averages (20, 50, 100, and 200-day SMAs), and each of these averages is itself moving higher.
- Its performance compared to others is notable, doing better than 88% of all stocks in the last year and 89% of similar stocks in the IT Services field.
This combination of points shows that AKAM is not just having a short-term rise but is in a continued, high-quality upward trend. For the breakout method, this high technical rating is key, it indicates the stock is a leader with momentum, raising the chance that a breakout from a quiet phase will lead to more price increases instead of a failed move.
A Good Formation for a Possible Breakout
While a solid trend is needed, it is not enough for a best entry. Buying a stock that has already made a big, long move has a high chance of a quick price drop. The second key piece is having a good formation, which shows a time of quiet trading or rest inside the larger upward trend. This makes a clear area of price floor and a more defined level for managing risk.
Akamai does well here too, having a Setup Quality Rating of 9 out of 10. This score looks at how narrowly a stock has been trading lately and if it is making a clear pattern. The technical report states that AKAM has been trading quietly in a zone between about $103 and $121 over the last month, with price action now in the middle of this area. More significantly, the study points to lower price swings during this time and finds a clear price ceiling just above the current price, starting near $118.00.
The existence of this defined ceiling, along with a price floor below near $112.68, creates the structure for a specific trading idea. The formation suggests that a clear move above the $118.00-$119.15 ceiling area could mark the end of the quiet phase and the start of the next upward push. Also, the report notes a recent "Pocket Pivot" signal, a pattern of price increase with higher trade volume often seen before important moves, adding another piece of positive information for technical analysts.
Bringing Together the Technical View
When joined, AKAM’s top Technical Rating and high Setup Rating present a notable case for technical investors. The stock has shown its health through a strong year-long upward trend and now seems to be pausing in a stable, quiet phase. This pause has let moving averages move closer and price swings decrease, preparing for a possible next move.
The automatic study based on these ratings indicates a possible trade plan, with an entry point just above the noted ceiling at $119.16 and a stop-loss order set below the price floor at $112.16. It is important to state that this is an example made from the closest price floor and ceiling levels; each investor must always do their own study to decide entry, exit, and trade size that fit their own risk level. The fairly close stop distance, at about 5.9%, also needs thought for those with a longer-term view who might want a wider margin.
Find Other Possible Formations
The technical breakout screen that found Akamai Technologies is a changing tool that checks the market each day for similar patterns of health and quiet trading. For investors wanting to see other stocks that now meet these strict technical and formation rules, a new list of results can be seen using 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 study shown is based on technical measures and past data, which are not promises of future results. All investment choices have risk, and you should do your own research and talk with a qualified financial advisor before making any trading decisions. The author and publisher are not liable for any financial losses that may come from acting on information given here.