Shares of Adobe (ADBE) took a nosedive in extended trading on Thursday after the company issued a disappointing current-quarter outlook. Despite posting better-than-expected results for its fiscal third quarter, the negative outlook overshadowed any positive news. As a result, investors are now closely watching Adobe’s chart for key support and resistance levels.
Ascending Triangle Breakdown
Adobe shares have been trading within an ascending triangle pattern since late February. The stock’s price recently broke above the pattern’s top trendline on high trading volume, signaling a potential uptrend. Additionally, the 50-day moving average crossed above the 200-day moving average, forming a golden cross, which further supports the bullish sentiment.
However, despite these positive technical indicators, the shares are now at risk of breaking down below the triangle’s lower trendline. This breakdown could mark the start of a new trend lower for Adobe. In after-hours trading on Thursday, the stock fell 9.1% to $533.
Key Support Levels to Watch
If Adobe shares continue to weaken after the disappointing outlook, investors should pay attention to several key support levels on the chart. The first support level is around $500, where the stock 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 $500 could lead to a decline to the $439 area. This level represents a pre-gap consolidation period during the stock’s impulsive move higher between May and June last year. It also aligns with the prominent swing low in May 2024.
The next support level to monitor is $386, which corresponds to several peaks that formed on the chart from early February to late April last year. Finally, a more significant correction in the stock could push it down to the $333 area. At this level, buying interest is likely to emerge around the May 2023 swing low. It also aligns with a measured move price target that calculates the distance between the ascending channel’s two trendlines in points and subtracts that amount from the pattern’s lower trendline.
Key Resistance Level to Monitor
During a countertrend move in Adobe shares, investors should keep a close eye on the $550 area. This level represents the ascending channel’s lower trendline and may act as a resistance level on retests. Selling pressure could increase if the price approaches this level.
In conclusion, Adobe’s disappointing current-quarter outlook has caused its shares to plummet in extended trading. Investors are now closely monitoring the stock’s chart for key support and resistance levels. A breakdown below the ascending triangle pattern’s lower trendline could signal a new trend lower, while important support levels to watch include $500, $439, $386, and $333. On the other hand, during a countertrend move, the $550 area may act as a key resistance level.
