EOT Trade Alert – January 22, 2016

Trade Alert:

Buy ADBE March 18th 2016 $92.50 calls at $3.00 or better

 

Company Background:

Adobe Systems (ADBE) is a diversified software company.  They operate in 3 segments – Digital Media, Digital Marketing, and Print and Publishing.

 

Short-Term Catalyst:

Adobe is a big company with a market cap around $44 billion.  It’s one of the big tech stocks with a mountain of cash… about $4.0 billion of it at the end of 2015.

The company had a solid 2015 with $4.8 billion in revenue and earned $2.08 per share.

This older tech company is shifting their business practice from selling licensed software to a web based subscription model that fits with today’s cloud computing world.

This has led to a steady increase in recurring revenue.  They’ve helped this stream of cash flow grow by expanding their suite of creative products through in house development and acquisitions.

As a result, ADBE stock has been moving steadily higher in a nice uptrend.  Over the last year, ADBE is up 23%.

The market-wide selloff to start 2016 triggered an 8% pullback from the recent highs. It’s important to note this pullback is contained within the upward trending price channel.   Now the technical indicators are pointing toward a short term rebound from oversold conditions.

In other words, ADBE has strong fundamentals and the technical indicators say the stock is at a great entry point.  Let’s grab call options on ADBE to profit from a rebound from these oversold conditions.

 

Trade Details:

Underlying Stock Symbol:	ADBE
Current Bid-Ask Price:	$2.80 – $2.92
Option “Buy Up To” Price:	$3.00
Break-Even On Stock At Expiration:	$95.50
Maximum Risk Per Contract:	$300.00

 

Exit Strategy:

ADBE is trading at $88.97 per share.  Resistance levels will be at $92.50 and $95.00.  Remember, we want this stock to move higher.  Support levels will be at $87.50 and $86.00. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.

 

Chart:

 

Category: EOT Trade Alert