Akamai (AKAM) suffered an extremely damaging breakdown last Wednesday following its fourth-quarter earnings report. The stock opened that session with a huge downside gap before finishing the day with a 10% loss on its heaviest volume since last July. After consolidating for a few days AKAM is heading lower again as this week comes to a close. In the near term, investors should expect more downside, which will result in a low-risk entry opportunity.
One day before last week's post-earnings collapse, AKAM closed just barely at its highest level since October 2015. The stock first began bumping up against heavy resistance near the $71.00 area in early October and appeared headed for a breakout in early January. As AKAM continues to fade away from major resistance near $71.00, which has now capped the October, January and February highs, an ominous top is in place.
Intense overhead pressure will likely drive AKAM down to the $59.00 level. This area is a major support zone and includes the stock's July high as well as the huge earnings-inspired breakout gap left behind back on Oct. 26. Also in this area is the 200-day moving average. If Akamai can regain its footing here, a low-risk entry opportunity will develop for patient investors. Until then, the stock will likely continue to provide pain.