Will Adobe Systems Inc. (ADBE) Rally on Earnings?

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Adobe Systems Inc. (ADBE) is a San Jose based software company that operates primarily in the digital media and marketing segments of the application software industry. Adobe software solutions are offered direct to individual and business consumers through a network of distributors, authorized retail resellers and direct download via web and mobile stores. At the time of this writing (10:40AM CST), ADBE is currently trading at 70.77, up 1.32% on the day. The stock is currently well within the upper portion of its 52 week trading range of 53.93-74.69, and has found support around 70.00 on the daily chart after re-testing and pulling back off of the year’s highs earlier this month. ADBE is set to report earnings today, 12/11/2014 after the market close.

Over the last eight quarters of earnings data, ADBE has traded resoundingly bullishly, moving higher on six out of eight sessions immediately following the EPS release. The average historical directional move during this time period has been about 6.5%. The options market is currently pricing in a slightly larger post earnings move of 7.65% this quarter, an implied move of about 5.45 in the underlying stock by the monthly option expiration on 12/20/2014. Technically, as mentioned before, ADBE remains extremely strong, rebounding over ten points since mid-October, and finding support above 70.00 on the daily chart. Additionally, ADBE remains above the upward sloping Ichimoku Cloud and just under the associated relevant moving averages. Considering ADBE’s propensity to react bullishly after earnings, coupled with the strong technicals, I am leaning bullish ADBE and will be looking to establish a long position going into this afternoon’s earnings release.

Andrew Keene

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