We’ve opened a new bullish trade on Adobe (ADBE). Adobe has enjoyed a virtually uninterrupted climb higher as traders have rewarded the company as it has worked on transitioning from a perpetual-license business model to a software-as-a-service (SaaS) business model for the digital media (Creative Cloud and Acrobat) side of its business.
Wall Street recognizes that adding subscribers brings stability to Adobe’s top-line revenues and bottom-line earnings. This, in addition to the growth in the company’s digital marketing (Marketing Cloud and LiveCycle) side of its business, has led research firms, like Argus, to raise their price targets on the stock.
Argus recently raised its price target for Adobe from $85 to $95. This led to a jump in the stock price from $80 to $84 beginning on June 22. Unfortunately for Adobe, it ran into the headwinds of a Greek-fueled market pullback at the end of June, and the stock revisited its former support level at $80. However, Adobe held at $80 and is now moving back higher. We anticipate that the stock is going to climb back up to its recent highs near $84 now that the market is rebounding.
‘Buy to open’ the ADBE August 85 Calls for a maximum price of $1.00.
We don’t typically give targets or stop losses based on the option price, but we’ll be watching the underlying stock closely as it nears the $84 region to take profits, and we’ll monitor Adobe closely if it approaches support.
And a note that we continue to hold the CurrencyShares Euro Trust (FXE) puts we recommended last week. We’ll let you know when we take action on that trade.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.
You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in their Advanced Technical Analysis Program.
