DailyPlay – Opening Trade (ADBE) – April 22, 2024

ADBE Bullish Opening Trade Signal

Investment Rationale

As a market leader in graphics and video editing for the past decade, ADBE’s business model was at risk with the rush of AI over the past year. However, their investment in AI tools for the creative industry has become a leader. Adobe has built a sizable moat around its business and remains one of the best-performing businesses in the tech sector. With its recent underperformance, now is an opportunity to purchase ADBE at a much more reasonable valuation. 

Technical Analysis

ADBE has shed about 22% of its market value in the past two months and approaching its $450 support level. It broke out from this level last year in June on the back of the AI hype and now it’s returned back with negative divergence and signs of exhaustion on the selloff. The risk/reward favors long exposure now as we start to reach these major support areas. 

ADBE – Daily

Fundamental Analysis

ADBE currently trades at only 25x forward earnings, which is inexpensive considering the 13% EPS growth that analysts are expecting over the next couple of years and its industry leading 35% operating margins. ADBE has continued to stay at the forefront of the AI revolution for the creative industry and will look to consolidate its leadership.

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 1 Contract May 31st $465/440 Put Vertical Spread @ $9.02 Credit.

Total Risk: This trade has a max risk of $1,598 (1 Contract x $1,598) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $1,598 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is bearish and expected to bounce off support.

1M/6M Trends: Bearish/Bearish

Relative Strength: 2/10

OptionsPlay Score: 90

Stop Loss: @ $18.04 Debit. (100% loss to the value of premium paid)

View ADBE Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Friday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View ADBE Trade