While the broader market remains on a circuitous route to nowhere, Adobe Systems Incorporated (ADBE) has been quietly consolidating near all-time highs. Like a coiled spring, it’s been building up energy for the coming breakout. The century mark is beckoning and Adobe stock isn’t one to ignore the call of higher prices.
The base building in ADBE began with March’s stellar earnings announcement.
The better-than-expected quarter launched Adobe Systems toward $98 before profit-taking crept in. Since then the stock has been in digestion mode.
The two months of meandering has allowed the 50-day moving average to catch up. In the process, any and all overbought conditions have dissipated.
The bullish undertones of Adobe’s base are revealed by the equal and higher pivot lows that have developed. Each and every downturn has been met with aggressive buying. Now’s the time for bulls to press their advantage. A breach of the $97.50 resistance zone will signal that Adobe stock’s next advance is upon us.
Look for the century mark as a magnet in the coming weeks should the ADBE breakout bid succeed.
Hit a Double With Adobe Stock Options
Adobe’s recent lack of vigor has kept a lid on implied volatility. As such, options can be scooped up on the cheap here. To further reduce the cost, not to mention risk, I suggest a bull call spread.
Buy the July $95/$100 call spread for $2.40 or so. The vertical spread consists of buying to open the July $95 call while selling to open the $100 call. The initial $2.40 debit represents the max loss and will be forfeited if ADBE sits below $95 at expiration.
The max gain is limited to the distance between strikes minus the net debit, or $2.60, and will be captured if Adobe stock can rise above $100 by expiration. If you think the looming breakout is all but assured, snatch up the call spreads now for a better price.
Otherwise wait for confirmation of the breakout, then jump in.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
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