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As the S&P 500 logs another all-time high, we’re looking to take advantage of Adobe Systems Incorporated (NASDAQ:ADBE), one of the tech stocks that has helped lead the market higher this year by climbing more than 75% since the beginning of the year, because we don’t think the uptrend is over.
The stock broke out of a solid bullish “wedge” continuation pattern on Tuesday and, based on the height of the previous bullish break that occurred in early November, we expect ADBE to climb toward a new high at $195 during the next few weeks as we approach the company’s earnings announcement on Dec. 14, after market close.
We wouldn’t expect to hold this trade through the earnings announcement — especially if the stock has already climbed higher in the meantime — but we are buying a January expiration date that provides the flexibility to hold the trade right up until the earnings announcement if necessary without worrying about all of the time value evaporating from an option with a December expiration.
ADBE has proven its ability to grow both top-line revenue and bottom-line earnings by increasing sales and boosting its margins. We expect to see more of the same in Q4 and as the company guides for 2018, especially if it increases the prices of its Digital Media offerings, which already have annualized recurring revenue (ARR) of $4.87 billion.
‘Buy to open’ the ADBE January (2018) 195 Call (ADBE180119C00195000) for a maximum price of $3.45.
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