Adobe Systems Incorporated: The ADBE Stock Chart Says It All

adbe-stockADBE Stock: Keeping It Simple

I like Adobe Systems Incorporated (NASDAQ:ADBE) stock because the trend on the price chart is simple and easy to discern. ADBE stock lacks much of the volatility that other technology names have, yet it remains a stellar performer.

The best investments I have come across share a similar characteristic. This characteristic is best illustrated using a price chart, because a picture is worth a thousand words. This picture illustrates a trend in the stock that is undeniable as price moves from the lower left to the upper right of the price chart. I consider such investments bellwether stocks as they gauge the overall health of the market and they are the last to drop off when market turmoil plagues the markets.

The following Adobe stock chart illustrates this undeniable trend.

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Chart courtesy of StockCharts.com

In 2012, Adobe stock started trading above the 200-day moving average. This moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish.

ADBE stock has spent the majority of the time trading above the 200-day moving average. There were numerous instances highlighted on the chart where ADBE stock broke below the aforementioned moving average. These instances have come on the backs of market turmoil, and have proved to be buying opportunities, rather than a bearish omen, as the market turmoil failed to become anything more than a minor blip within a long-term bullish trend. This will not always be the the case, but to-date it has been.

As long as ADBE stock is trading above this moving average, the trend towards higher prices is in full force and any pullbacks to test this level are within the context of a normal bull market.

I would never recommend buying on a break below a long-term moving average, because this would require trading against a signal. I would rather preach discipline and wait until shares close back above the 200-day moving average before trying to accumulate a position.

One of these days, market turmoil will once again grip the market and a much bigger sell-off will take hold and ADBE stock will fail to regain its 200-day moving average.

The following Adobe stock chart illustrates where longer-term support will be found if such an event were to take hold.

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Chart courtesy of StockCharts.com

The ADBE stock above illustrates the uptrend that has supported share price for nearly three decades. This trend is clear as day and is defined by a trend line. This trend line is created by connecting the troughs on the price chart. This bullish trend is defined by higher highs and higher lows.

This is the trend I was referring to when I mentioned that a picture is worth a thousand words. This trend line defines the bull market in Adobe stock, and as long as it remains above it, the long-term bull remains intact. This of course doesn’t meant that a bear market cannot hit the markets and drive Adobe stock below its 200-day moving average. A sustained close below that moving average could set in motion a test of this trend line.

At this moment, the indicator in the lower panel labeled “MACD” supports a continuation of this bullish trend. MACD is a simple and effective trend-following momentum indicator. Signal line crossings are used to distinguish between bullish and bearish signals.

In late 2012, this indicator crossed in a bullish manner and ADBE stock has trended higher ever since. As long as this signal remains intact, the bullish tailwinds necessary to maintain this trend are also intact.

Bottom Line on ADBE Stock

I am bullish on Adobe stock as it has proven to be a strong and steady investment that lacks the volatility of many of its counterparts and competitors. My bullish views are contingent on ADBE stock remaining above its 200-day moving average.