Shares Tumbled More Than 9% in Extended Trading on Thursday

Key Takeaways

• Adobe shares moved sharply lower in extended trading on Thursday after the digital multimedia software maker issued a disappointing current-quarter outlook that overshadowed better-than-expected results for its fiscal third quarter.

• The stock sits poised to break down below the lower trendline of an ascending triangle pattern, a move that could start a new trend lower.

• Investors should watch important support levels on Adobe's chart at $500, $439, $386, and $333, while keeping an eye on the $550 area during a countertrend move.

Adobe (ADBE) shares tumbled in extended trading on Thursday after the digital multimedia software maker issued a disappointing current-quarter outlook that overshadowed better-than-expected results for its fiscal third quarter.

Although the San Jose, California-based company’s shares have gained around 28% over the past three months, they remain underwater for the year as enterprise customers continue to spend cautiously on premium software products against a backdrop of economic uncertainty and high interest rates.

Below, we’ll take a closer look at Adobe’s chart and use technical analysis to identify important post-earnings price levels to watch out for.

Ascending Triangle Breakdown

Adobe shares have oscillated within an ascending triangle since late February, with the stock’s price nudging above the pattern’s top trendline on the highest trading volume since late June ahead of the company’s quarterly results. Moreover, the 50-day moving average recently crossed above the 200-day MA to form a golden cross, a chart signal indicating a new uptrend.

Despite the bullish technicals, the shares sit poised to break down below the triangle’s lower trendline on Friday, a move that could start a new trend lower. The stock fell 9.1% to $533 in after-hours trading Thursday.

Watch These Key Support Levels

If Adobe shares continue to see post-earnings weakness, investors should monitor several key support areas on the chart.

The first sits around $500, a location on the chart where the shares could find support from the psychological round number and a horizontal line connecting multiple peaks and troughs from June 2023 to August this year.

A close below this level could see the stock decline to the $439 area, where investors may look for buying opportunities near a pre-gap consolidation period during the stock’s impulsive move higher between May and June last year. This region also closely corresponds with the prominent May 2024 swing low.

The next lower level to watch lies at $386, an area that may encounter support near several peaks that formed on the chart from early February to late April last year.

Finally, a longer-term correction in the stock could see a drop to the $333 area, where the price would likely find buying interest around the May 2023 swing low. This level also aligns with a measured move price target that calculates the distance between the ascending channel’s two trendline in points and subtracts that amount from the pattern's lower trendline. ($550 - $217 = $333)

Key Resistence Level to Monitor

During a countertrend move in Adobe shares, investors should keep a close eye on the $550 area, where the price may face selling pressure on retests of the ascending channel’s lower trendline.

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