Adobe's Must-Know Chart Layout Ahead of Earnings Report

Adobe is set to report earnings on Thursday and the graphics-software producer's charts show several well-defined levels on the upside and the downside.
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Adobe Systems  (ADBE) - Get Report has not had an easy couple of weeks, with the shares down 17% from the highs. 

To some investors’ surprise, though, that’s better than both the Nasdaq and S&P 500, which both are down nearly 18% from the highs.

Facing an equity market that's sharply volatile and under significant pressure, Adobe is set to report in anything but an easy environment. But that’s exactly what it will do on Thursday after the close.

Adobe stock is one of the few that still has its technicals intact, even though it is also facing strong selling pressure. (At last check the San Jose, Calif., company's shares were off 5.8% at $313.02.)

Bulls will look for Adobe to report a strong result. Even if that doesn’t translate to a higher stock price, it will at least give them confidence that the business is running smoothly. 

The company will also likely be able to provide some sort of context for how e-commerce is doing at this time and what online traffic is like.

Let’s look at the charts to get an idea of the technicals.

Trading Adobe Stock

Daily chart of Adobe stock. 

Daily chart of Adobe stock. 

I really like the chart for Adobe stock, not because it hasn’t seen its fair share of losses - it has - but because the levels are very well-defined. The road map above tells investors exactly what they need to know.

For instance, the prior breakout mark at $310 is support, along with the 200-day moving average. If lost, it puts the $285-to-$290 zone in play and makes prior support of $310 and the 200-day moving average potential resistance on the eventual rebound.

If overwhelming selling pressure comes into Adobe stock, $260 could eventually be on the table. That would be a 33% decline from the stock’s current 52-week high, although I don’t expect such a drastic move in the short term.

On the upside, let’s see if Adobe can reclaim and hold the 100-day moving average near $324.40. The stock on Wednesday is failing to hold this mark, after reclaiming it on Tuesday.

Above the 100-day puts the 50-day moving average near $350 in play. Above that and the $360-to-$365 level is possible. 

While volatile, Adobe’s chart has the advantage of having relatively well-defined levels. But because it reports earnings, we have a potentially volatile event amid a volatile trading environment. That makes an already difficult prediction near impossible.

So let’s say this. After Adobe reports, it needs to do one of two things: either hold the $305-to-$310 level on the downside or reclaim the 100-day moving average on the upside. From there, follow the levels.