AKAM Pullback Presents Intriguing Entry Point

AKAM's 320-day moving average could vault the stock higher

Assistant Editor
Feb 11, 2021 at 2:18 PM
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The shares of Akamai Technologies Inc (NASDAQ:AKAM) are down 3.2% at $101.75 at last check, extending yesterday's 10.9% plummet. The company reported better-than-expected earnings and revenue after the close on Feb. 9, however, they also announced a corporate reorganization and weak forecast regarding the pandemic. Making matters worse was a price-target cut from Needham to $120 from $135, while both J.P. Morgan Securities and Craig-Hallum issued downgrades and trimmed their price targets. Now for the silver lining; two analysts did hike their own price targets yesterday, and the pullback has brought AKAM to a trendline that if past is precedent, could signal a rally.

More specifically, the stock just came within one standard deviation of its 320-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, three similar signals have occurred during the past three years. AKAM was positive a month after each time, averaging an 11.2% gain. From its current perch, a move of similar magnitude would put the stock up past $113, reclaiming its losses from the past couple days. 

AKAM Feb 11

Elsewhere, there's plenty of pessimism to be unwound in the options pits. AKAM's 10-day put/call volume ratio of 2.20 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 93% of readings in its annual range. This shows puts being picked up at a much faster-than-usual rate during the past two weeks. 

These options are relatively cheap at the moment, too. The stock's Schaeffer's Volatility Index (SVI) of 34% stands higher than 17% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment.  Plus, the equity's SVS sits at 79 out of 100, indicating AKAM has surpassed option traders' volatility expectations during the past year.

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