AKAM: Channel Breakout

One of the most difficult things for most investors to do is to realize a loss when a stock has a big "Take No Prisoners" Gap Down below support, but it usually is the right play.

From July, 2007 - July 2008, AKAM traded between 25.06 and 41.45. On August 1, 2008 AKAM gapped down to 25.06 exactly. That kind of open would seem to have some "intent" because it puts EVERYONE who got long the stock in the prior year under water and that kind of open usually is "just for openers" because it can and does get much worse in the ensuing days and weeks, as it did for AKAM.

The gap down and close below 25.06 support put a target of 9.22 IN PLAY.

40.90 - High (the more conservative of the 41.45 - 40.90 highs)
25.06 - Low

40.90-25.06 = 15.84 points of downside. 25.06-15.84 = Target 9.22 IN PLAY.

The November 20, 2008 low was 9.25, within three cents of the Double Top target.



Off the November low, AKAM has rallied 123% within this channel. After the parameters were established (#1 through #4), AKAM found resistance at the top of the channel on FOUR occasions, validating it as resistance.

Anyone who shorted any of the FOUR failures at resistance made a very reasonable play on a risk: reward basis. Stop it out if the top of the channel gets taken out on a closing basis, which never occurred. For a short-term play, shorting any of those failures was good for a quick profit.

Yesterday, however, AKAM closed above the channel. Uh-oh. That's a breakout above QUADRUPLE validated trendline resistance. Yes, it could be a Fakeout/breakout, but personally, I wouldn't stay short a breakout like that because Ms. Market has said, "That isn't resistance any more." I would take a reasonable loss rather than risk getting caught in a short squeeze. If it does turn out to be a Fakeout/Breakout, one always can get short later on.

Basis the weekly chart, Kumo (Cloud) resistance is from 19.74 - 26.295, and we've got MAJOR RESISTANCE beginning at 25.06, where AKAM broke down last August so if a short squeeze does transpire, there "should be" some willing sellers in that 25.06-26.295 area.