UPDATE: Possible Trade in ADBE

This stock is still in my entry range. I did not post charts previously but I think they are worth taking a look, in particular because it has been the same set up that I have seen from the names that have been breaking out like my recent play in PBR.

If you compare the daily chart of ADBE and PBR you will see the same pattern where the stock breached its uptrend and put in a rounded bottom. There is then consolidation at the level that was breached which I have seen on several charts lead to a nice move to the upside. I would change how I play this one though. I mentioned below that I was interested in the Mar '10 35 calls instead because of my lack luster results of trading front month options for directional movement I would look at Apr '10 35 calls instead. They are currently trading at 1.45. See new analysis below:

I would also tighten up the stop from 34.50 to 35.

I was messing around with the stock screener at finviz.com and was looking for stocks that had recently crossed above their 50 day moving average. I found ADBE, they also happen to report on 3/23. So I am looking to buy some March '10 $35 calls with the stock currently trading at 34.79.

My thesis is that the stock will continue to trade above its 50 day moving average into earnings. I do not want to hold the position through earnings as that adds a whole other level of risk. The $35 calls are currently trading for about $0.67 a piece. I am interested in buying 5:

Entry: 34.75-35

Target: 37.80

Stop 34.50

Risk: $100 (0.61% of total portoflio)

Position Cost: $325

Reward: $900-$1000

Holding Period: Less than 3 weeks

Currently as I write this the market is turning negative and ADBE has reversed course and is no longer trading above its 50 day moving average. I would like to initiate this position if we can get candlestick close on the hourly chart above the 50 day.

So at this time I am not putting in an order but am ready if the opportunity presents itself.

Comments

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