Adobe Stock Tests Historically Bullish Trendline Again

ADBE tends to rally after pulling back to its 200-day, but bulls are already all-in

Managing Editor
Oct 7, 2019 at 11:38 AM
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Shares of technology powerhouse Adobe Inc (NASDAQ:ADBE) are just about flat in today's session, trading fractionally higher at $277.21. The stock is down about 10.9% from its July 26 closing high of $311.27, with the pullback exacerbated by a negative earnings reaction in mid-September. However, ADBE remains 22% higher year-to-date, with support stemming from a key moving average that's proven to be a bullish indicator in the past.

Specifically, according to Schaeffer's Senior Quantitative Analyst Rocky White, the security is trading within one standard deviation of its 200-day moving average, after spending most of its time above this trendline over the past two months. Similar tests of 200-day support have occurred five times in the past few years, resulting in an average 21-day gain of 6.4%, with 100% of the returns positive. A similar surge from current levels would put ADBE near $295 by this time next month.

Daily ADBE with 200MA

Moving into Adobe stock's options pits, the equity's 10-day call/put volume ratio across the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.77 and ranks in the 88th annual percentile. This shows a stronger-than-usual demand for long calls relative to puts in recent weeks.

Echoing this is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.81, which ranks in the low 14th percentile of its annual range. In other terms, call open interest easily outranks put among contracts expiring within three months.

This strong bullish bias among speculative options players is reinforced by low short interest, with only 1.2% of ADBE's float sold short. With relatively little investor pessimism available to unwind and fuel the equity's next leg higher, Adobe stock's latest bounce from its 200-day moving average could be relatively mild.

 

 

 

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