Adobe continues to struggle. This options trade doubles down on a potential rebound
If you caught my article last week , you know I’ve been tracking Adobe (ADBE) closely. Since that initial write-up, the stock took another leg down as the broader market continued to digest the geopolitical headlines. But instead of invalidating the original thesis, this secondary dip has actually handed us a gift: a second chance to enter the exact same structural trade, but at even more favorable, lower strikes. That said, with the Cboe Volatility Index (VIX) still lingering in the 20s, this is not the time to go heavy. Trading volume and frequency must remain strictly controlled. Despite the elevated volatility, ADBE remains front and center on my radar. The chart is flashing a textbook mean-reversion setup, and I am zeroing in on two specific technical metrics to time this entry: A quick heads-up: Executing these setups requires strict discipline, which is exactly why I rolled out automated trading on Maya. If you are looking for a way to remove the emotional guesswork from your trading, this 100% rules-based engine handles the entries and exits entirely on its own. Feel free to take a look at the new capabilities here . Relative strength index: ADBE recently took a beating, pushing its RSI well below the critical 30 threshold into deep oversold territory. As a rule, I never buy simply because a stock is oversold. I wait for it to prove it can climb back out. We received that exact confirmation on April 10 when the RSI broke back above the 30 line, signaling that the buyers are regaining control. Moreover, the RSI has bounced violently off of that level and is rising sharply, indicating a high-probability mean reversion opportunity. Directional movement index: To provide confirmation of this potential reversal, I look to the DMI indicator. We are seeing the early stages of a definitive shift, with the directional lines beginning to pivot and change course. Both the DI+ and DI- lines are changing direction, which indicates a simultaneous loss of selling pressure and a gain in buying momentum. This curling action is often the precursor to a broader trend change, signaling that the sellers are losing their grip. The trade setup: ADBE 235-240 bull call spread Last week, we looked at the 240/245 bull call spread. Today, to capitalize on this secondary dip, I am structuring the lower 235/240 bull call spread. Currently, this new spread can be filled for around $2.50. Think of this approach as a smarter, more capital-efficient way of “averaging down.” Instead of committing a massive chunk of capital to a single trade right out of the gate, separating your entries, and even spreading them across different expirations on the same stock, is a fantastic way to mitigate concentration risk. When the market hands you an opportunity like this, you can achieve that averaging-down effect by simply entering at lower strikes as the price drops. Because of this strategic scaling, we do not need ADBE to stage a massive, market-leading breakout. If the stock just manages a standard technical bounce and drifts above the $240 level by expiration, both last week’s spread and this week’s spread are positioned to cross the finish line as full 100% winners. It is simply about catching a very achievable technical bounce in an oversold name and adjusting our strikes to match the market’s reality. Here is my exact trade setup: Buy $235 call, May 8 expiry Sell $240 call, May 8 expiry Contracts: 1 Cost: $250 Potential Profit: $250 — Nishant Pant Founder: https://tradewithmaya.com/ Author: Mean Reversion Trading YouTube, Twitter: @TheMeanTrader DISCLOSURES: Nishant has a ADBE bull call spread expiring on May 8. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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