Software giant Adobe Inc. (ADBE) will be reporting earnings on Tuesday after the market close. The stock has tumbled sharply since November but we are starting to see some bottoming action in recent weeks.
In our Dec. 16 review we wrote that "Could ADBE stabilize around the 200-day moving average line - sure. But the charts are weak and pointed lower. Continue to avoid the long side of ADBE until we see definite signs of a tradeable low or bottom."
Let's check the charts out again.
In the daily bar chart of ADBE, below, we can see how the shares skidded lower and lower into February and only made a slight new low in March so far. Prices are in a downtrend below the declining 50-day moving average line and the bearish 200-day line.
The On-Balance-Volume (OBV) line peaked before prices did in September. The OBV line has made a small bounce in March but it might be close to breaking the downtrend from December.
The Moving Average Convergence Divergence (MACD) oscillator made a low in January and higher lows in February and March creating a bullish divergence when compared to the price action making lower lows. A bullish divergence can sometimes foreshadow a bullish turnaround.
In the weekly Japanese candlestick chart of ADBE, below, we can see a bearish picture with no clear signs of a bottom reversal. Prices are still in a downtrend below the declining 40-week moving average line.
The weekly OBV line is still in a decline from September. The MACD oscillator is in a bearish decline below the zero line but we do see some narrowing of the two moving average lines.
In this daily Point and Figure chart of ADBE, below, we can see a potential downside price target in the $316 area.
In this weekly Point and Figure chart of ADBE, below, we can see a downside price target of $296.
Bottom-line strategy: I have no special knowledge of what ADBE may report to shareholders on Tuesday but I do not currently see a setup yet for a recovery rally. Maybe one more dip for a retest of the March low is needed. We'll see soon enough.
