Analog Devices, Inc. (NASDAQ: ADI)

Analog Devices, Inc. engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits (ICs) for use in industrial, automotive, consumer, and communication markets worldwide. The company offers signal processing products that convert, condition, and process real-world phenomena, such as temperature, pressure, sound, light, speed, and motion into electrical signals. Its product range includes data converters to translate real-world analog signals into digital data and translate digital data into analog signals. The company also offers micro-electro mechanical systems technology based sensors comprising accelerometers to sense acceleration, gyroscopes to sense rotation, inertial measurement units to sense multiple degrees of freedom, and microphones to sense audio; isolators for various applications, such as universal serial bus isolation in patient monitors, smart metering applications, and satellites. Its products are used in a range of electronic equipment, including industrial process control, factory automation, instrumentation and measurement, energy management, and optical systems, as well as aerospace and defense electronics, automobiles, digital televisions, medical imaging equipment, patient monitoring devices, wireless infrastructure equipment, networking equipment, digital cameras, and portable electronic devices.

To review Analog’s stock, please take a look at the 1-year chart of ADI (Analog Devices, Inc.) below with my added notations:

1-year chart of ADI (Analog Devices, Inc.)

While trading primarily sideways over the last (5) months, ADI has formed a solid resistance at $47 (red). That resistance would also provide a 52-week high breakout if the stock could manage to break above it. In addition, the stock has been climbing a long trendline of support (blue) since last July. At some point, the stock will have to break one of those two levels.

The Tale of the Tape: ADI has an up trending support and a 52-week resistance level to watch. A long trade could be made on a breakout above the $47 resistance or on a pullback to the support, which is currently approaching $44. A break below the up trending support could be an opportunity to enter a short trade.

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Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT