Don't Ignore This Chart!

Adobe Losing Momentum One Week Before Earnings

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Negative divergences on the MACD and light volume on breakouts are two important criteria in identifying a possible top.  Accumulation requires volume so I'm always suspicious if advances begin to run out of it.  In the case of Adobe Systems (ADBE), it has these markers in place just one week before they release their latest quarterly results.  I would look for further selling prior to earnings or a possible selloff after results are released.  Be very careful if a failed breakout occurs on better than expected results.  Here's the chart:


Should ADBE lose its rising 20 day EMA support, where it's held the last three tests, it would appear to be on a crash course with trendline, price and 50 day moving average support in the 87-88 area.  Volume has been extremely light in recent trading sessions.  That, along with the negative divergence, tells me it's a tired stock and in need of further consolidation or temporary price decline.

Happy trading!

Tom

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Tom Bowley
About the author: co-founded Invested Central in 2004 and served as the site's Chief Market Strategist for more than 10 years. Invested Central provides stock market education and guidance for those interested in making their own financial decisions. During his tenure at Invested Central, Tom co-hosted Market Open LIVE, a national radio broadcast that covered many of the largest markets across the U.S. In addition, he has spoken at various conferences throughout the United States and Canada and has taught thousands of traders across the globe how to trade equities more wisely with an emphasis on managing risk and intermarket relationships. Learn More
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