To receive further updates on this Adobe, Inc. (NASDAQ:ADBE) trade as well as an alert when it’s time to take profits, sign up for a risk-free trial of Strategic Trader today.
We are opening a new bullish trade on Adobe, Inc. (NASDAQ:ADBE). We have been managing a position in ADBE for a few months, and with the recent rally in technology stocks, we think now is a good time to open a new put write.
Economic data over the last two weeks has improved consumer and business demand expectations, which should continue to lift technology stocks higher.
We like ADBE because of how the company has leveraged its subscription model to shift further towards services revenue and increased profit margins. And ADBE recently acquired a company that will help expand the services offered in its Creative Cloud.
Allegorithmic
ADBE acquired Allegorithmic two weeks ago. The French company develops the Substance tools, which are used to by animators, designers and AAA game creators.
ADBE had already invested in Allegorithmic, but this acquisition means ADBE will be able to further integrate the widely used tools into its already popular software suite.
Because we like ADBE’s cloud based business model, any expansion of the services it offers is positive. The acquisition didn’t boost the stock right away, but we think it improves ADBE’s fundamental outlook.
The recent tech rally, which took ADBE above resistance, got us excited about selling puts.
Breaking Above $254
This is a good time to enter a trade on ADBE because the stock broke the neckline of a bullish inverted “head and shoulders” pattern (with a “double bottom” for the “head”) near $250 per share.
Daily Chart of Adobe, Inc. (ADBE) — Chart Source: TradingView
ADBE broke above resistance at $254 on Monday, and it could stay at or around that level in the run up to its earnings announcement. It will announce after the market closes on March 14th, 2019.
Option premiums are still inflated following all the volatility last month. This puts the risk/reward ratio of this trade further in our favor because there is more option premium to erode between now and the middle of March.
To find out which ADBE puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
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 Strategic Trader.
Follow our Facebook page to receive each Trade of the Day direct to your News Feed — and join the conversation.
