Last up this week is content delivery network Akamai (AKAM). At first glance, it looks like Akamai is forming a bearish pattern (the opposite of PETM's setup, in fact). But closer inspection reveals that the setup in Akamai is actually a bullish development; the key is knowing when to buy this name.
Right now, Akamai is forming a falling wedge, a setup that looks somewhat similar to a downtrending channel save for one crucial difference: In a falling wedge, the trend lines that form the channel are converging. Like the inverse head-and-shoulders in MRK, this is a statistically significant setup -- one study puts the eventual predictive power of a wedge (falling or rising) at near 90%.
To trade a falling wedge, we're looking for a breakout above that downtrending resistance line. It's absolutely essential to wait for that signal before pulling the trigger on this stock. After all, shares could fall significantly further and still remain within the channel. Once we see a breakout in this name, the 200-day moving average looks like an attainable price target.Consider a protective stop just below the 50-day moving average. To see these plays in action, check out the Technical Setups for the Week portfolio on Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
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