Gap support continues to hold.

Adobe left behind a solid base following its powerful post earnings breakout back on June 19th: http://thisweekonwallstreet.com/adobe-a-top-gainer/ . The stock began that session with a big upside gap. By mid August the post earnings rally had stretched to 13%. Two weeks later ADBE had lost its upside momentum and was in need of a healthy pullback. After six straight loses the June 19 breakout gap was filled. ADBE has been consolidating in a narrowing range since while the $280.50 area held the lows.

We believe ADBE is setting up as a low risk buy near current levels. A close below $280.00 would violate last week’s lows sending a clear warning sign that key support is weakening. On the upside, a clear take out of the $294.00 area(last week’s high) could spark a fresh rally leg. A retest of the highs($313.00) would be the next target.

At time of publication we are long ADBE in some managed accounts.