Software Stock's Pullback Presents Attractive Entry Point

An unwinding of options traders' pessimism could bode well for ADBE

Deputy Editor
Feb 14, 2024 at 12:16 PM
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Shares of technology powerhouse Adobe Inc (NASDAQ:ADBE) are 0.6% higher to trade at $605.25 this afternoon. The stock has so far shed 2.4% in February, taking its year-to-date lead dangerously close to breakeven. However, ADBE is still 59.8% higher in the last 12 months, with support stemming from a moving average that has proven to be bullish time and again.

According to Schaeffer's Senior Quantitative Analyst Rocky White, the equity is trading within one standard deviation of its 100-day moving average, after spending most of its time above it over the past two months. Similar tests of this trendline occurred five times during the past five years, resulting in an average 21-day gain of 7.9%, with 80% of the returns positive. A similar surge from current levels would put ADBE near $653 by this time next month, levels not seen since December 2021.

ADBE Chart February 142024

Moving into Adobe stock's options pits, its Schaeffer's put/call open interest ratio (SOIR) of 1.19 ranks in the 92nd percentile of its annual range. In other words, put open interest easily outranks call among contracts expiring within three months, and an unwinding of this pessimism could put more winds at the security's back.

 

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