Should You Buy the Dip in Adobe (ADBE)?
Adobe has been a long-term outperformer and the recent dips could offer an attractive entry point for buyers. Check out what the following two analysts have to say about the stock - Here’s Why Adobe (ADBE) Stock Could be a Solid ‘Buy’ in Today’s Market and Is Adobe Stock A Buy Right Now? Here's What Earnings, ADBE Chart Show.
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Technicals
Adobe has corrected lower in the past week and is seen testing a confluence of support. The support area consists of a horizontal level at $423 that previously acted as support in late June as well as the lower bound of a trend channel that has encompassed price action since April. The earlier downside momentum has already subsided which signals that buyers are defending this area. While above $423, the stock has the potential to continue higher, in line with the trend from the low in March.
*source Tradingview.com
If you agree there's further upside ahead for ADBE, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.
Buy To Open ADBE 21AUG20 425 Puts (ADBE200821P425)
Sell To Open ADBE 21AUG20 430 Puts (ADBE200821P430) for a credit of $2.15 (selling a vertical)
This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $432. Unless the stock rallies quickly from here, you should be able to get close to this amount.
Your commission on this trade will only be $1.30 per spread. Each contract would then yield $213.70 and your broker would charge a $500 maintenance fee, making your investment $286.30 ($500 – $213.70). If ADBE closes at any price above $430 on August 21, both options would expire worthless, and your return on the spread would be 75% (855% annualized).
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Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run. Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry
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Any questions? Email Colin@terrystips.com
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Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Colin@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you up for our Premium Service package ($97 monthly subscription). You get 3 months ($291 worth) of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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