Trade of the Day: Two Ways to Trade Adobe Stock

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In the off chance you  haven’t noticed, the broader U.S. large-cap stock market as measured by the S&P 500 has rallied strongly off the late December 2018 lows. While I see stocks largely range-bound through the first half of 2019, in the near term, stocks like Adobe (NASDAQ:ADBE) have potential in either direction for trades. Below I discuss two potential trade setups in ADBE stock.

One of the most serious challenges for most market participants is to keep their time frames for trades/investments straight. In other words, just because one say has a bullish view on stocks through a six-month lens doesn’t mean stocks can’t drop a few percentage points in the ensuing days or weeks. Think about it, have you ever ultimately been correct on your views on a stock but off in the near term timing? I know I  have, too many times to admit it … but each time valuable lessons were learned.

To wit, when I look at a bigger picture chart of something like shares of Adobe, I have my concerns through a six-to-12-month lens, but that does not mean the stock can’t see further appreciation in the near-term.

ADBE Stock Charts


Click to Enlarge
Source: Charts by TradingView

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

Looking at the multiyear chart, we see that ADBE stock thanks to the selling spree in Q4 2018 has mean-reverted back to a longer-standing reference support line. The bulls will point out that such a re-test is healthy and that from a longer-term momentum perspective (MACD momentum oscillator at bottom of chart) the stock remains oversold.

While I don’t doubt the stock can back and fill in either direction by a few percentage points here, it’s hard to imagine ADBE stock will see fresh all time highs anytime soon.


Click to Enlarge
Source: Charts by TradingView

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart we note that ADBE stock has now rallied sharply (more than 20%) off the late December lows and is coming into an area of well-defined technical resistance. The way I see it one of two trades will likely trigger in the near future:

  1. Either ADBE will break and hold below $240, which could lead to a move lower toward $223 – $227
  2. Or ADBE will break and hold above $250, which could allow it to squeeze higher toward a next upside target around $260-$262.

Either way, at this juncture traders would be well advised to respect the potential for both of these moves rather than having staunch opinions on a near term directional move in one direction or another.

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