Autodesk: There’s Plenty of Bear Food in ADSK Stock

The broader market may have found a bottom, but bearish trend traders can still find seasonal opportunity in Autodesk (ADSK) as ADSK stock continues to draw a weak price design on its weekly chart.

Autodesk: There's Plenty of Bear Food in ADSK Stock

It may not be “the bottom,” but Wednesday was a good day for the overall market. In the S&P 500, a double-bottom pattern off the August 24 mini flash crash was confirmed. But shares of ADSK stock were nonetheless conspicuously weak.

Hanging over traders in ADSK stock, management reaffirmed its FY16 profit and sales forecast which falls in line with Street views. Apparently, the Street was expecting more given ADSK stock’s 2.43% decline in the face of the broader market’s strong gains on Wednesday.

Also notable, a bullish write-up in Barron’s over the weekend with the publication’s cover page touting “Autodesk shares have 50% upside” attributed to a new “cloud-based” business focus for the design-software pioneer failed to inspire traders to get behind ADSK stock.

Autodesk’s clearly weak price action might beg the question of just what will it take to garner bulls getting behind shares of ADSK stock? In the interim, we can look to the price chart to see why bears appear so interested, in control and taking aim at even lower prices in ADSK.

ADSK Stock Weekly Chart

ADSK weekly chart
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Source: Charts by TradingView

The broken lateral range was supported by the 200-week simple moving average and a slightly lower 50% Fibonacci retracement level dating to a 2011 cycle low. The latter is still technically being tested, but we don’t expect ADSK stock to hold.

The fact is with ADSK stock’s October 2014 pivot low already broken and now it’s April 2014 low and prior key high from May 2011 failing to support Autodesk shares in the face of good news; ADSK stock is doing everything except sending out a RSVP that it’s heading lower.

ADSK Stock Bear Put Spread

ADSK volatility
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Source: Charts by TradingView

After looking at the ADSK stock options board, the Nov $45/$40 put spread for $2 or less is attractive. Currently, the spread is nearly one point in-the-money and breaks even at or below $43. The max profit of $3 would occur if shares are below $40 at expiration.

Speaking of expiration, November falls within ADSK stock’s estimated earnings release range of Nov. 18 to Nov. 23. This means the event may or may not act as a catalyst, so traders need to take that into consideration.

Because there are 52 days are still on the calendar, I don’t see the unknown earnings date variable as too big of an issue. At the end of the day, there’s plenty of time to make adjustments for that type positioning, if traders wish to participate — or even exit, if it turns out the contract is still in play for ADSK stock’s earnings event

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

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