Cult Stocks: Akamai Is a Survivor

Akamai (AKAM) -- Daily Source: eSignal

This year's price action shows a strong rally off the January low, followed by a period of intense volatility after the stock hit a high near $47 in June. Note the major July selloff that triggered in reaction to the second-quarter earnings release. This dip traced out a classic breakdown gap, cutting through the 50-day moving average and setting up ideal conditions for a sustained downtrend.

Instead, the decline ended just two days later, with short-sellers providing the fuel for a persistent recovery that filled the gap on Aug. 10 and broke out over a two-month trend line just six days later. However, rally momentum has failed to develop since that time, allowing gravity to return and knock price into a sideways pattern between $44 and $48.

Accumulation has taken a minor hit in the last few weeks, as traders have second thoughts about their positions. This might be end-of-summer noise that means nothing, or it could be the start of a failure swing back through the trend line. If gravity takes control, the decline could drop price on top of the 50-day moving average, currently near $43. That level might offer a low-risk entry ahead of a rally run into year's end.

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