In a surprising move, Adobe Systems (ADBE) Before the opening announced a major acquisition, it agreed to acquire Figma for $20 billion. It also announced its quarterly results, which were due to be released after the shutdown.
For the first bit of news, the company plans to acquire the collaborative design platform for $20 billion in a half-cash, half-stock deal.
As for fiscal third-quarter earnings, the graphics software specialist earned $3.40 a share on $4.43 billion in sales.
That was a slight outpour of earnings and a slight loss of revenue: Analysts were looking for $3.35 a share for $4.44 billion in revenue. In a word mixed.
For the fourth quarter, management expects $3.50 per share of earnings of $4.52 billion versus consensus estimates of $3.47 and $4.6 billion. Again, mixed.
But the market is clearly voting, sending Adobe stock down more than 13% to new 52-week lows and its lowest price since April 2020.
Trade Adobe Stock
Earnings may be mixed, but the market reaction is decisively less. And unless Adobe Stock collects some sort of massive bounce, today’s action is going to be very frustrating for long periods of time.
As the above weekly chart shows, Adobe stock is breaking below the long uptrend support (blue line). This sign of support begins in late 2018 and includes the 2020 virus low and the June 2022 low.
The stock is stabbing through this level now and sinking into no man’s land.
It would be constructive to see a steady 78.6% retracement area near $310, which was a good breakout area in late 2019 as well. However, this is not a great incentive for bulls to rely on it.
If it holds and we get a bounce, then traders will have a level of risk that they can measure. But overall, Adobe stock is in a downtrend at the moment.
I’m not suggesting that Adobe will go down to $200 or something necessarily disastrous like that.
Instead, the charts are simply not constructive for the bulls (except for a contract from $300 to $310).
If it fails, we could see the $250-$260 area again. This is where we find the bottoms of Covid.
On the upside, there is a long way between the current prices and $360, but that is the level that the bulls want to take back in stocks.
Be careful not to bounce into this area, it may act as resistance on his first try.