Adobe Systems Well Positioned For All-time Highs (ADBE, AAPL)

Adobe Systems may offer a buying opportunity in the upper 80s, ahead of a strong rally into triple digits.

Adobe Systems Inc. (ADBE) has provided quiet Nasdaq-100 and big tech leadership for more than four years and is currently one of its hottest performers, trading near an all-time high. The stock transacts just 3.6-million shares per day on average, near the midpoint of index activity, while a $47-billion market capitalization takes the 26th spot among the 104 current components.

It’s now achieved the status of the must-own position in tech and growth portfolios, posting stronger gains than widely held Apple Inc. (AAPL) since 2011, rising more than 400% compared to AAPL’s 207%. It’s also better positioned to resume its strong uptrend after a volatile first quarter dropped the iPhone maker into the midpoint of a massive 22-month trading range.

Is now a good time to buy ADBE, given its lofty position, or should market players wait for aselloff that offers a more advantageous reward: risk ratio? Fortunately, first quarter earnings won’t impact that decision because the company already reported on March 17, with the next confessional scheduled for June. Given this beneficial timing, charting technicals should take precedence in determining the best time and price to add this winner to your portfolio.

The stock entered a powerful uptrend in 1998, rising from 2.95 (post three stock splits) to 43.65 in just two years. It topped out in November 2000 and joined the rest of the tech universe in a severe bear market, spiraling lower in three selling waves that relinquished more than 80% of the prior rally. It finally bottomed out in single digits in the summer of 2002.

The subsequent recovery reached to the prior high in 2006, but the rally momentum fizzled out, yielding sideways action into a minor 2007 breakout that added just 5 points. It turned lower in a failed breakout just one month later, entering a downtrend that coincided with the 2008 to 2009 bear market. The decline ended at a 5-year low near 16 in March 2009, giving wave to a renewed uptrend that remains in force, more than seven years later.

It took four years for the stock to reach horizontal resistance generated by the 2000 and 2007 highs. A 5-month basing pattern yielded a 2013 breakout that attracted widespread buying interest, lifting price into a series of all-time highs. The last rally wave peaked at 96 in December 2016, setting up major resistance in triple digits.

 

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Category: ADBE, AAPL

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