Trade Akamai Technologies (Nasdaq: AKAM) for a Potential 75% Return in Two Months

Stocks jumped on Friday to close out what proved to be a rather strange week. All four of the indices saw gains over 1.0%, but it was the Russell that really stood out with a gain of 2.08%.

The Dow gained 1.37% and the S&P was right behind it with a move of 1.36%. The Nasdaq lagged the others a little, but it still managed a gain of 1.02%.

All 10 sectors moved higher on Friday with the energy sector gaining 3.64% to lead the way. The industrial sector jumped 2.22% and was the only other sector to gain over 2.0%.

There were only two sectors that failed to gain at 1.0% and they were the technology sector (+0.85%) and utilities (+0.99%).

My scans continue to produce more bearish signals than bullish signals with many stocks in overbought territory after the post-election rally. Friday’s scans produced 63 bearish signals and 20 bullish signals.

Even with the big discrepancy, the barometer still inched a little higher with a reading of -48.3. The final reading on Thursday was -55.1.

After four straight bearish trade ideas, I have a bullish one for you today. The company is Akamai Technologies (Nasdaq: AKAM) and the cloud software company scores well on the fundamental ratings. The EPS rating is a 94 and the SMR rating is an A.

What got my attention on the chart was what appears to be a double-bottom pattern at the $95 level. For the pattern to be confirmed the stock will need to move above the peak between the two lows and in theory it should move above that level by the same amount between the lows and the high in between. The high between the two lows was $103.55.

Buy to open the January 95-strike calls on AKAM at $9.50 or better. These options expire on January 15, 2021. I suggest a target gain of 75% and that means the stock will need to reach $111.65. Based on the double-bottom pattern, the target move should take the stock up to $112. I recommend a stop at $96.50.

— Rick Pendergraft

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Rick Pendergraft, Trades Of The Day

Rick Pendergraft has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick's analysis process includes fundamental, sentiment and technical analysis.