Look for Adobe to follow through on yesterday's breakout

Yesterday Adobe broke upward through a downward-sloping trend line. Today it pulled back, but weak volume on the pullback suggests the stock will follow through. As a software company, Adobe is relatively insulated from the earnings recession afflicting other parts of the tech sector. Adobe beat analyst estimates on its recent earnings report, which is what's moving the stock upward. Earnings guidance was a little softer than analysts expected, but the forecast of 20% growth is still very respectable. Adobe has a 9/10 Equity StarMine Summary Score and is rated somewhat undervalued by S&P Capital IQ. Its P/E of 50 is high for the sector, but pretty standard for a growing mega-cap company. Adobe is about 10% off its high from July.

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So far, no follow-through on the breakout but no major breakdown either. There's a buying opportunity today as ADBE approaches the bottom of its recent trading range around 272. Save some dry powder in case it drops to 260 or 252. (Typically my strategy is to buy a very small initial position in a security, and then to triple the size of my position each time it drops to a new buy target / support level. So I routinely save LOTS of dry powder in case a trade goes wrong.)