Akamai Technologies, Inc.: AKAM Stock Chart Suggests a $95.00 Target
AKAM Stock: Patiently Waiting
I have been watching Akamai Technologies, Inc. (NASDAQ:AKAM) stock for some time now, anticipating some sort of bullish movement to erupt. My bullish enthusiasm was set aside after AKAM stock dropped in dramatic fashion after a disappointing earnings report in July 2016.
For those not familiar with my investment style, I use charts to set strategic and systematic strategies. The price chart is instrumental in deciphering a trend. It always pays to be on the right side of a trade. My style begins with looking at the same investment over different time frames. It is important that multiple time frames confirm the same premise. If there are conflicting signals, then I find it best to just move on and analyze another company.
Akamai stock first drew my attention when I noticed an exceptionally large pattern on the AKAM stock chart that spanned a decade. Large patterns that span a longer duration outperform smaller, shorter ones.
The following Akamai stock chart illustrates the pattern that developed over a decade.
Chart courtesy of StockCharts.com
The formation highlighted in pink on the chart above is a bullish setup pattern known to traders as a cup-and-handle formation. Traders use these setup patterns to identify continuation patterns that reaffirm the predominant trend. This pattern executed when Akamai stock price closed above the horizontal resistance level in February 2014.
This pattern helps me decipher the trend as well as provide a potential price objective. This exceptionally large pattern projects a price of $95.00, and that is considerably higher than the price of AKAM stock today. The pattern took seven years to develop and, as a rule of thumb, AKAM stock has seven years to attain this target.
AKAM stock has yet to attain this price objective, as it fell short of this target as shares peaked under $80.00 in the summer of 2015, and then proceeded to sell off. I am going to argue that the selloff was nothing more than a backtest that will act to reaffirm the bullish cup-and-handle pattern. Based on this premise, I believe AKAM stock is going to make another attempt at hitting $95.00.
The following chart illustrates the signal I am awaiting to confirm a run toward higher prices.
Chart courtesy of StockCharts.com
The chart above focuses on the signals generated by the lower panel labeled “MACD.” Moving average convergence divergence (MACD) is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish momentum. This signal has been quite effective for those who employ a trend-following investment strategy.
In June 2012, the MACD generated a bullish cross at $35.00, and that signal did not terminate until October 2015, at a price of $65.00. This represented an impressive return of 85% in under three years.
I am currently waiting for this signal to cross in a bullish manner, and the histogram on the bottom right of the chart is suggesting that a cross may occur in the next few months.
The following Akamai stock chart illustrates the constructive developments in 2016.
Chart courtesy of StockCharts.com
The major theme of the chart above is with regards to the signal generated from a moving average cross.
A golden cross indicates that a bull market is on the horizon, and a death cross indicates that a bear market is on the horizon. The signal is confirmed when the faster moving average (50 day-moving average) moves above or below the slower moving average (200 day-moving average). The golden cross and death cross are exact opposites.
In October 2105, Akamai stock gapped lower and this bearish action was later confirmed with a death cross. AKAM stock proceeded to tumble lower in the coming months.
In July 2016, AKAM stock generated a golden cross while trading within a sideways channel. The signal has come close to averting, but it still remains bullish. If Akamai stock can break out higher from the channel while the golden cross is still in play, this would have tremendous bullish implications. This event would also cause the monthly MACD signal to execute and confirm the bullish premise.
The Bottom Line on Akamai Stock
I am neutral on AKAM stock, awaiting bullish signals to sway my bias. I am optimistic that such signals will occur in the near future, but I would rather wait until confirmation before I change my bias on Akamai stock.
