However, the rally is even more impressive considering two things: First, the markets are relatively muted in early and midday trading as investors await the Federal Reserve's announcement on rates. Second, Adobe's guidance for next quarter came up short of consensus expectations.
All too many times we've seen a company beat on top- and bottom-line expectations, only to issue disappointing guidance that swats the stock lower. Adobe's guidance came up short for both sales and earnings, so what makes the company special enough to rally?
For one, its growth is impressive, with earnings and revenue up 10% and 25% year-over-year, respectively. Plus, given its consistency, investors are likely banking on management's guidance being a bit conservative. Additionally, the stock did not come into the report amid a red-hot rally. In fact, it was cautiously holding up about 5% to 6% off its highs made back in April and trading mostly sideways over the past few months.
Now the charts are setting up really nicely for Adobe investors. Let's take a look.
Trading Adobe Stock
As you can see on the chart above, Adobe stock is hurdling an important level at $285. This mark has served as short-term range resistance over the past few months, with Adobe only temporarily clearing it in April on its run to $291.70. Now at $289, those highs are back in the picture and above them could cause a squeeze up to $300 or more.
Before Adobe reported, the action was actually quite similar to Salesforce (CRM) - Get Report . Both stocks have been biding their time in relatively sideways action. While earnings were set to break CRM stock out of that consolidation, its all-stock buyout of Tableau Software (DATA) - Get Report has weighed on the stock once again.
Short of a big acquisition for Adobe in the coming days or weeks, the bulls may be back in control. As investors can also see on the chart, the relative strength index (RSI) does not suggest an overbought condition. Further, the momentum-measuring MACD metric suggests momentum could be shifting into bulls' favor. Both are highlighted by blue circles on the chart.
The stock had been forming a wedge, with a series of higher lows (with the exception of the late-May breakdown) and lower highs. It's now resolving higher and above $285. So long as Adobe stock maintains $285+, it looks good on the long side.
Below could inject more sideways "chop" back into the price action, while the 50-day moving average may be called on once more as support. Above $285 could push the stock to new all-time highs.
See how the stock closes on Wednesday, as the Fed may move the markets in the afternoon.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.