There has been considerable discussion recently about Adobe and its strong fundamental valuations, which may be puzzling to recent investors as the stock price continues to underperform. This is especially notable given the software sector’s strong performance, with many companies in the space rallying to new highs and attracting attention from investors. However, Adobe stands out technically, but not in a positive light, as the shares continue to diverge from the recommendations of many fundamental analysts. This highlights the importance of examining the situation from an SIA technical perspective, addressing key support and resistance levels for holders of the stock. Focusing first on the performance of ADBE shares, the attached table for the SIA Computer Software sector shows Adobe positioned in last place on the SIA relative strength matrix report. The performance figures reflect a -23.63% return over the past year, -14.97% over the past three months, and -22.02% over the past month. When contextualizing Adobe's performance against the broader industry, the SIA Computer Software Equal Weight Index stands at the top of the SIA sector report, with the sector showing strong performance. The SIA point-and-figure chart, using color-coded indicators, shows that the SMAX score for the sector is currently 8 out of a possible 10, indicating strong relative strength against other asset classes. However, resistance from a level dating back to 2021 remains a challenge, which will be a critical level to monitor.
Turning to the point-and-figure chart for ADBE, it is evident that shares failed to surpass the prior high of 2021, instead producing a lower peak. Soon after, the chart showed several double bottoms, even as the broader sector continued to perform well. As a result, ADBE shares have diverged from the rest of the sector, falling into the Unfavored zone on the SIA Computer Software sector report, as indicated by the color-coded overlay tool. The stock is also in the Unfavored zone in every SIA report in which it is a constituent (see embedded box for full list and rank). The SMAX score for ADBE is currently at 0 out of 10, reflecting its significant underperformance compared to other asset classes and peers within the sector. For those holding ADBE shares, critical support levels include the current range of $423.71–$415.40, as well as $391.44, $376.24, and the important trendline at $314.82. If ADBE begins to rally, resistance may emerge at the 3-box reversal level of $467.81, with further resistance at the 2020 level of $506.37 and the 2021 level of $559.08.
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