Adobe's stock price rebounded from the bottom! Is the shadow of AI gradually dissipating? (2024.06.18)

Hello everyone, this week's 【Technical Tracking】 will analyze Adobe (ADBE), a global leader in multimedia software development.

Hot Events

On June 14, 2024 (Friday), Adobe's stock price closed up over 14%. Previously, the company's Earnings Reports exceeded market expectations and raised the annual performance guidance.

Before the Earnings Reports were released, Adobe's stock price had fallen 23% year-to-date, significantly underperforming the U.S. stock market. This sharp increase in stock price suggests that the stock may shed its gloom and reverse its fortunes.

It is worth mentioning that during this round of U.S. Earnings Reports season, the software Industry performed poorly overall. There were concerns about whether Adobe's generative AI model, Firefly, provided enough creativity to drive Adobe's product marketing. However, following the release of Adobe's Earnings Reports, some of these concerns were alleviated to a certain extent.

JPMorgan Analyst Mark Murphy upgraded Adobe's stock rating from "Neutral" to "Shareholding," raising the Target Price from $570 to $580. He believes that investors are likely disillusioned by Firefly, transitioning from expectation to disappointment, and expects Firefly to gradually demonstrate its profitability in the second half of this year and next year.

Since Adobe did not disclose the contribution of AI to revenue, it has been difficult for the market to assess what achievements have been made in AI. However, investors can take an alternative approach by looking at key Indicators such as "Digital Media Net New Annual Recurring Revenue (ARR)" for insights. This Indicator measures the new business scale of Adobe's cloud products, and the latest Earnings Reports data shows that the Digital Media Net New ARR reached $0.487 billion, higher than Adobe's previous estimate of $0.44 billion.

Technical Analysis

Trend analysis:

Adobe's stock price reached a high of $638.25 in early February 2024, and since then it has been on a downward trend, with a decline of about 30% over four months, touching a low of $433.97. The Fibonacci retracement levels drawn on the daily chart indicate that the stock price has rebounded to nearly the 50% retracement level since hitting the bottom.

Indicators interpretation:

• After the Earnings Reports were released, Adobe's stock price strongly broke through a downward trendline and returned above the 50-day moving average (MA50) for the first time in four months, suggesting some upward momentum in the short term.

• The MACD Indicators released a 'golden cross' and 'bullish divergence' signals, indicating that a potential short-term bottom in the market may have formed.

• The KDJ Indicators also released signals similar to those of the MACD Indicators.

• After the last two Earnings Reports were released, Adobe's stock price experienced a significant downward gap and upward gap, and the current stock price is almost at the midpoint of these two gaps, indicating that a fierce struggle between bulls and bears will unfold, thus at least one of the gaps will be filled.

Focus direction:

Currently, the price of Adobe shares has rebounded over 20% from the low point of $433.97 on May 31, entering what is called a "technical bull market." On the daily chart, investors can pay attention to the 50% and 61.8% Fibonacci retracement levels, as well as the potential resistance of the 200-day moving average (MA200). Additionally, attention should be paid to the filling of the gaps above and below the stock price, as these are likely to dominate the market direction going forward.

This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

All investments involve risks, including the potential loss of principal, and there is no guarantee that any investment strategy will be successful.