Adobe Systems Incorporated (NASDAQ: ADBE)

Adobe Systems Incorporated is a diversified software company worldwide. It operates in three segments: Digital Media, Digital Marketing, and Print and Publishing. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote, and monetize their digital content. The Digital Marketing segment offers solutions for how digital advertising and marketing are created, managed, executed, measured, and optimized. The Print and Publishing segment offers products and services, such as eLearning solutions, technical document publishing, Web application development, and high-end printing, as well as publishing needs of technical and business, and original equipment manufacturers (OEMs) printing businesses. The company markets and licenses its products and services directly to enterprise customers through its sales force, as well as to end-users through app stores and through its Website at adobe.com.

Take a look at the 1-year chart of Adobe (NASDAQ: ADBE) below with my added notations:

1-year chart of Adobe (NASDAQ: ADBE)

Over the last 10 months ADBE has slowly climbed higher. During that time the stock had also formed a nice trend line of support (blue). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. ADBE’s trendline is very important. Earlier this week the stock broke that trendline, and now it currently sits on its key level of $80 (green).

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The Tale of the Tape: ADBE has broken below trend line support, but still holds its key level of $80. A short position could be entered on a rally up to the trendline, which is currently near $81, with a stop placed above that level, or wait for a break below $80. A long position could be entered at $80, or if ADBE were to break back above the trendline.

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

Follow me on Twitter: @cmtstockcoach