After reporting their results on June 11th, Adobe Inc.(ADBE) beat expectations and had their stock trade higher. They set a new all-time intra-day high of $429.27 on Friday, June 19th.
While Adobe is a popular play on cloud computing, the stock is not for value infestors. Rather, it’s a play on technical momentum. According to Macrotrends, Adobe currently has a price to earnings ratio of 55.73 and does not offer a dividend.
Adobe has kept this trend of beating earnings estimates for six consecutive quarters. This and the new high makes the overall weekly trend positive, but also extremely overbought. Their stock is in an inflating parabolic bubble formation with a 12-week stochastic reading of 93.09. This is a sign that it’s time to book profits.
Since March 15th, 2019 Adobe’s stock has been above a golden cross, when the 50-day simple moving average went above the 200-day simple moving average, signaling that higher prices may be coming. On November 8th, 2019 this signal nearly reversed, but then the 50-day simple moving average rose instead of declining. The strategy of buying weakness to the 200-day simple moving average is what works under a golden cross, which was doable on September 26th, 2019, when the average was $270.88.
A good trading strategy is to buy Adobe stock on weakness to its monthly, quarterly, semiannual, and annual value levels at $403.44, $349.18, $337.11, and $289.12, respectively. Then reduce holdings on strength while taking into consideration the elevated stochastic reading.