Breakout Trade Example Using AKAM 02/26/2009


This is a recent example of Breakout trade using AKAM. Not only is AKAM breaking out and moving higher, it is doing so as the NASDAQ itself has been moving lower. Take a look at this chart comparing AKAM to the NASDAQ over the last 6 months:

Breakout Trade AKAM

The legend for the chart is at the bottom. AKAM is the yellow line and the NASDAQ is the purple line. This is a great example of finding a strong stock standing out in a weak market. Imagine the possible move higher in this stock if the market itself moves higher. It could be very significant.

The next chart shows AKAM over the last six months with support and resistance lines provided.

Breakout Trade AKAM

Back in late October 2008 the $12.00 level was a support level that held until mid-November 2008. At that time the $12.00 price level became an upper resistance level as seen in late November and early December 2008.

After bouncing off the $12.00 resistance level a few times in early December, it finally broke through and moved higher just before December 8th. When it did break through, AKAM made it's way to the $16.50 price range which was a previous upper resistance level as seen in October 2008.

Failing to break through the $16.50 level in early January 2009, AKAM moved lower back to the previous $12.00 level which was now a support level.

Notice that earlier this month in February 2009, AKAM spiked higher and closed above the $16.50 resistance level on high volume. This displayed a nice breakout move higher and shows a breakaway gap.

For the last several weeks AKAM has stayed above this level, which is now proving to be a support level. So far it has held quite nicely, even as the NASDAQ has been declining.

This possible trading opportunity was brought to my attention using technology provided by Market Club. They have provided a timely video demonstration showing further details of this trading scenario and all are welcome to view it free of charge. Take a look at the free Market Club video here:

As mentioned in the free video, anyone taking on a long position in AKAM at this time may want to consider a stop loss just below the current support level. This would be a logical choice as the trading scenario above is based on the possibility of AKAM moving higher from here and staying above the recent support level. Any breakdown through this level would remove the initial reasoning for entering and staying in this trade.

If the general markets move lower from here, they very well could pull AKAM down as well. If this happens, there appears to be a strong possibility that AKAM could pull back to the $16.50 price area once again and provide another re-test of the support level.

Here is a follow up chart of the Breakout in AKAM as of April 5, 2009:

Breakout Trade AKAM

Depending on how your stop loss was/would have been placed, this wound up being a nice predictable trade. AKAM pulled back after the initial chart I showed above and made a short term low coinciding with the major market indices on March 9, 2009. After that though, AKAM continued it's previous signs of strength and moved a respectable 30% higher in two weeks pretty much uinder the radar.

The drop you see on the chart on the last bar, April 3, 2009, was from a downgrade issued. With over a 100% move from it's November low, and not being a Financial stock subject to crazy volatility, a downgrade and selling was overdue. I currently have no opinion on which way this one will go from here as I have not taken a closer look recently, but for the purpose of this page, AKAM was well suited for identifying a breakout.

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