Quarterly reports from Adobe Inc. (ADBE) and Oracle Corporation (ORCL) will draw plenty of attention to the market-leading software applications sector this week, with both stocks trading close to all-time highs. However, solid metrics and bullish guidance will be needed to avoid major sell signals, driven by growing fears that a China-U.S. trade war will presage a major economic slowdown.

Oracle abandoned the Nasdaq exchange for the NYSE's greener pastures in 2013, replaced by Tesla, Inc. (TSLA) when Oracle relinquished membership in the Nasdaq-100 index. Shares of the old-school tech enterprise have gained a respectable 71% in the past six years, while Adobe has rewarded shareholders with historic returns, gaining more than 600%. Both issues have performed equally well so far in 2019, adding around 20%.

Adobe Inc. (ADBE)

Chart showing the share price performance of Adobe Inc.

Adobe reports second quarter earnings results after Tuesday's closing bell, with Wall Street analysts and market watchers now expecting earnings per share (EPS) of $1.78 on $2.7 billion in revenues. The stock sold off about 4% after Adobe beat first quarter estimates and lowered second quarter guidance in March, but it recovered those losses in just two weeks, lifting to a five-month high above $270.

Looking back, the stock broke out above multi-decade resistance near $50 in 2013 and entered a powerful trend advance that held up remarkably well during the 2015 into 2016 correction. That resiliency underpinned a June 2016 breakout that accelerated to the upside in the first quarter of 2017. The rally continued to post exceptional gains into September 2018, when shares topped out at $278, giving way to a volatile decline that hit a 10-month low in December.

The 2019 recovery wave unfolded at the same angle of attack as the prior decline, completing a round trip into the 2018 high in April. It broke out immediately but stalled quickly, easing into a test of breakout support that will soon enter its third month. Unfortunately for trend followers, this is an all-or-nothing scenario, with a rally above $282 confirming a breakout while a sell-off through the June low at $257 signaling a failed breakout that predicts much lower prices. 

Oracle Corporation (ORCL)

Chart showing the share price performance of Oracle Corporation (ORCL)

Oracle is expected to report EPS of $1.07 on $10.9 billion in fiscal fourth quarter revenues during Wednesday's post-market release. The stock gapped down to a five-week low after Oracle beat profit estimates and met revenue expectations in March but bounced strongly, ending the session with an 11-cent loss. It posted an all-time high on the following day and added another point into April's peak at $55.53.

The stock topped out at $46.47 when the internet bubble burst in 2000, marking a lofty price level that didn't come back in play for more than 14 years. The subsequent decline found support at $7.25 in 2002, marking a low that hasn't been challenged in the past 17 years. It turned higher into the new decade, gaining ground within a shallow rising channel before initiating a final assault on multi-year resistance in 2014.

The rally ended just 24 cents above the 2000 peak in 2015, giving way to a broad consolidation, followed by a 2017 breakout that stalled in the low $50s in September. Two 2018 breakout attempts failed, while a 2019 uptick posted an all-time high at $55.53 before reversing in April and signaling a failed breakout. The stock bounced strongly in June but has still hasn't reinstated breakout support, adding considerable risk to this week's confessional.

The Bottom Line

Adobe and Oracle posted all-time highs in 2019 but still haven't clear major resistance levels, raising the stakes for this week's earnings reports

Disclosure: The author held no positions in the aforementioned securities at the time of publication.