How to Trade Cloud Giants Adobe and Oracle Ahead of Earnings

NEW YORK (TheStreet) -- Investors looking to profit from the fast-growing field of cloud computing may want to consider the shares of Adobe Systems (ADBE) and Oracle (ORCL), both of which are scheduled to report earnings this week.

Potential investors can use technical analysis to help determine how to adjust stock positions before and following share-price volatility associated with earnings reports. The charts and techncial profiles below should help with trading decisions on Adobe and Oracle, two big players in cloud computing, which is the use of remote servers and data centers to manage, process and store data.

Adobe is scheduled to report its quarterly earnings after the closing bell on Tuesday. Analysts on average expect the company to post earnings of 31 cents a share. On Tuesday, the company announced new features for its Creative Cloud platform.

Oracle is scheduled to report after the closing bell on Wednesday. The analysts' average earnings estimate is 83 cents a share.

Here's the daily chart for Adobe.


Courtesy of MetaStock Xenith

Adobe closed at $78.90 on Monday, up 8.5% year to date after setting an all-time intraday high of $80.74 on May 21. The stock is up 14% since trading as low as $68.98 on Jan. 14. Note how the stock has tracked the 200-day simple moving average higher since May 8, 2014. The 200-day was last tested on Feb. 2. The up-and-down volatility and price gaps are shown for the last two years, and the stock is now above its 50-day and 200-day simple moving averages of $77.40 and $73.37, respectively.

Here are the weekly chart and analysis for Adobe.


Courtesy of MetaStock Xenith

The weekly chart is positive with the stock above its key weekly moving average of $78.36. The momentum reading for the stock is projected to rise to 79.15 this week from a reading of 77.91 at the end of last week.

Investors looking to buy Adobe should place a good-till-canceled limit order to purchase the stock if it drops to $71.10, which is a key level on technical charts until the end of June.

Investors looking to book profits should place a good-till-canceled limit order to sell the stock if it rises to $80.57 which is a key level on technical charts until the end of June.

Here's the daily chart for Oracle.


Courtesy of MetaStock Xenith

Oracle closed at $43.72 on Monday, down 2.8% year to date and down 6.4% from its all-time intraday high off $46.70 set on Dec. 24. That high was just 30 cents above the stock's tech-bubble peak of $46.40 set in September 2000. Note how the stock has been tracking the 200-day simple moving average since Dec. 13, 2013. The price gap higher on Dec. 18 followed an earnings beat reported after the closing bell the day before the gap. Note also how this price gap was filled in 2015. The 200-day was last tested on March 12, and the stock is up 6% since then. The stock is on the cusp off its 50-day simple moving average of $43.72 and above its 200-day simple moving average of $42.24.

Here are the weekly chart and analysis for Oracle.


Courtesy of MetaStock Xenith

The weekly chart would shift to negative it the stock ends the week on Friday below its key weekly moving average of $43.79. The momentum reading for the stock is projected to fall to 66.19 this week down from 66.94 at the end of last week.

Investors looking to buy Oracle should place a good-till-canceled limit order to purchase the stock if it drops to $37.76, which is a key level on technical charts until the end of June.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the stock if it rises to $44.89, which is a key level on technical charts until the end of this week.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share-price direction.

Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the crash of 2008, and then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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