Market Overview

Leader of The Pack


When the market wants to go higher, frankly there is not much you can do other than look for leaders and play then accordingly. Right now, tech names are leading the overall market. This is clearly evident by looking at the QQQ and the SPY; the Q's have already broken above their recent top, whereas the SPY is still trying to do so.

So, the best way to paly this market is to look for leading tech names. Those with strong technical setups are even better. Take a look at Adobe Systems (NASDAQ: ADBE); this is a name that I have liked for a few months given its propensity to work higher, consolidate above the 20-day and 50-day moving averages, and break out of chart patterns.

Most recently, shares of Adobe breeched the $29.00 resistance level and ran into the mid-November gap. Shares have since tested the 20-day, held, and worked higher. Today, shares broke the previous monthly high at $29.47. This stock is doing everything right, showing that large players want to dabble in this name on any pullback.

Frankly, the best way to play this name is by being long the stock. As always, consider a start position first, and then add on pullbacks. Those that are worried about total cash outlay can sell LEAPs against their long stock position (perhaps using some of that premium to buy short-term protection, if desired); selling the Jan2013 $35 call @ $1.61 would be a smart play if that is your prerogative.

Pure options traders might consider buying the Feb2012 $29/31 call spread for a net debit of $0.81 or the Feb2012 $29/29 risk reversal for a net debit of $0.44.

Adobe Systems Incorporated offers a range of business, Web and mobile software and services used by professionals, knowledge workers, developers, marketers, enterprises and consumers for creating, managing, delivering, optimizing and engaging with content and experiences across multiple operating systems, devices and media.

Posted-In: Long Ideas Technicals Options Markets Tech Trading Ideas


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