4 Trade Ideas for a move higher in Adobe: Bonus Idea

  • Posted by on February 20th, 2018 at 7:30 am

Here is your Bonus Idea with links to the full Top Ten:

Adobe Systems, $ADBE, ran higher under trend resistance until it gapped up over it in October. It continued higher and then pulled back. As is often the case, prior resistance became support after a minor break down and then stock price bounced in December. It ran to atop in late January and then pulled back again with a long lower shadow also stopping at trend support. The reversal from there is back at the prior top going into the week.

A break of resistance to a new all-time high would give a target short term on a Measured Move to 214.50. At present there is no resistance above 204. Support lower comes at 196 and 185.50 then 180. Short interest is low in the stock at less than 1%. The stock pays no dividend and the company is expected to report earnings next on March 15th.

The weekly options chain shows the largest open interest above on the call side at the 205 strike, but with some size from 180 to 190 on the put side below. The March options chain covers the earnings report and shows traders expecting a move of about $14 or nearly 7% by then. It also shows the largest open interest at 195 on the put side and 210 on the call side.

Adobe Systems, Ticker: $ADBE

Trade Idea 1: Buy the stock on a move over 204 with a stop at 199.

Trade Idea 2: Buy the stock on a move over 204 and add a March 200/190 Put Spread ($4.00) as protection through earnings. Sell the April 220 Calls ($3.00) to cover most of the cost of protection.

Trade Idea 3: Buy the March 9 Expiry/April 210 Call Calendar ($4.65). Sell the March 190 Puts ($2.65) to lower the cost.

Trade Idea 4: Buy the April 190/210 Bullish Risk Reversal ($1.50).

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with February Options Expiration behind, sees the equity markets recovered substantially from their first correction in 2 years.

Elsewhere look for Gold to continue higher in its new uptrend while Crude Oil also resumes the path higher. The US Dollar Index looks better to the downside and US Treasuries are biased lower. Both are entering major trend change territory. The Shanghai Composite and Emerging Markets have reversed their moves lower with the Chinese market still a bit weak.

Volatility continues to drift lower easing the pressure on the equity markets. The equity index ETF’s SPY, IWM and QQQ, all had strong moves higher on the week, retracing at least 61.8% of the moves lower. All three ended the weak with possible reversal candles on the shorter timeframe though, but with strong charts on the longer timeframe. Perhaps some short term weakness remains. Use this information as you prepare for the coming week and trad’em well.