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Akamai's Breakout Looks Perfect, but What Are the Charts Saying?


Don't lose sight of the possibility that this may be a final sprint before a meaningful top.

Akamai Technologies (NASDAQ:AKAM) has been a beast of late, shrugging off market weakness to break out of a multimonth sideways pattern. The measured move off this consolidation is $8.14, which would take the stock to $56.36. The five-year high is $54.65. What is also reassuring is that the breakout is being confirmed by rising volume.

What I can't shake, however, are the DeMark charts (for more on how to interpret DeMark indicators, click here): a daily Combo Sell 13 printed yesterday with associated "risk level" at $51.61; today will almost certainly print a daily Perfected TD Sell Setup and a weekly Combo Sell 13; the weekly TD Prop Exhaustion Up target is at $51.36. The monthly chart is on bar 6 of a TD Sell Setup and TDST Level Up (resistance until broken on a qualified basis) looms large at $52.72. All these DeMark indicators suggest that AKAM has burned through a lot of buying power to get where it is.

To make matters more complicated, the monthly Combo and Setup counts have nailed virtually every top and bottom of the last 10 years, and the TDST Levels Down that were in place at any given time served as support almost to the penny. However, on a weekly basis, the price action failed to react to the various signals in all but one case (a Combo Sell 13 at the 2007 peak).

Confusing? Yes and no. Having climbed within reach of the five-year high and $9.50 away from its post-Internet bubble top of $60 (back in 2007), one would expect that buyers have spent a fair amount of ammo, and it follows that the latest breakout higher might well be using up the last reserves. On the other hand, if the completion of the monthly Sell Setup and the monthly TDST Level Up fail to stop the rise, $100 should start creeping into the conversation.

Bottom line: The traditional technical breakout looks textbook perfect, but don't lose sight of the possibility that this may be a final sprint before a meaningful top. Consider staying long, but with an itchy trigger finger.

Twitter: @FZucchi
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Position in AKAM
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