In our last review of Adobe Systems Inc. (ADBE) , we concluded: "A close below $134 on ADBE looks like it will weaken the picture, while it will probably take a close above $145 to strengthen the chart." So far, ADBE has not moved to break above or below our two trigger points; however, prices have weakened.
(See Jim Cramer's take on Adobe in today's piece: Top 10 Tech Stocks Compared to the Dotcom Era (Part I))
Let's review the latest charts and indicators to see if we need to adjust our levels or even our stance. The market is fluid and we need to be flexible.
In this daily bar chart of ADBE, above, we can see that ADBE ended June and started July on a soft note. Prices just closed below the rising 50-day moving average line. There are two visible volume surges in June and they may be a last gasp, with aggressive buying being met with aggressive selling.
The daily On-Balance-Volume (OBV) line has leveled off in June -- not making a new high and not turning lower -- suggesting that buyers and sellers of ADBE are in a neutral state. The daily Moving Average Convergence Divergence (MACD) oscillator turned down quickly in June, even as prices made new highs.
In this weekly bar chart of ADBE, above, we can see that prices are at their widest point above the 40-week moving average line. The weekly OBV line has been neutral for the past two months, failing to confirm the new price highs. The weekly MACD oscillator is crossing to a take profits sell signal.
In this Point and Figure chart above, we can see that ADBE has "overshot" its $126 price target. A rally to $147.95 would keep this chart bullish, but a decline to $135.28 would probably generate further price weakness.
Bottom line: After a strong rally from around $105 in December, the pattern of trading has shifted from up to more sideways. Signs of aggressive selling have not yet become evident, but some of the indicators have weakened. Traders long ADBE from lower levels should raise sell stop protection to a close below $135.