Short Trade Idea
Enter your short position between $305.48 (yesterday’s intra-day low) and $312.62 (yesterday’s intra-day high).
Market Index Analysis
- Autodesk (ADSK) is a member of the NASDAQ 100 and the S&P 500.
- Both indices advance inside bearish chart patterns with rising bearish trading volumes.
- The Bull Bear Power Indicator of the NASDAQ 100 is positive but below its descending trendline.
Market Sentiment Analysis
Equity markets have continued their reversal from November’s lows, driven by hopes that the US central bank will deliver a Christmas gift in the form of a 25-basis point interest rate cut. Still, conditions from November’s sell-off persist, and lower interest rates will not address them. While the holiday shopping season started at a record-setting pace, it masked the weakening consumer. Adding to consumer worries is the weakening labor market, while inflation remains stubborn. The AI bubble conversation began to shift into air-pocket talk. Still, uncertainty continues to accompany the AI trade, with Snowflake’s earnings miss being the latest reminder of an overvalued sector.
Autodesk Fundamental Analysis
Autodesk is a multinational software company best known for AutoCAD, a computer-aided design software used by architects, engineers, and designers to design and construct models of buildings and structures.
So, why am I bearish on ADSK despite its upbeat outlook?
Despite a minor earnings beat, operating margins remain under pressure, competition is rising with superior AI-assisted products, and valuations remain excessive, confirming a disconnect between the current share price and economic reality. Its earnings-per-share growth is declining, its debt-to-equity ratio is above 75% of its peers’, and, despite being a mature software firm, ADSK does not pay a dividend.
Autodesk Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 59.54 makes ADSK an expensive stock. By comparison, the P/E ratio for the NASDAQ 100 is 34.62.
The average analyst price target for ADSK is $365.14. It suggests good upside potential with dominant bearish pressures.
Autodesk Technical Analysis
Today’s ADSK Signal
Autodesk Price Chart
- The ADSK D1 chart shows price action inside a bearish price channel.
- It also shows price action below its ascending Fibonacci Retracement Fan.
- The Bull Bear Power Indicator is bullish with a descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- ADSK advanced less than the NASDAQ 100 Index, a bearish confirmation.
My Call on Autodesk
I am taking a short position in ADSK between $305.48 and $312.62. Excessive valuations, one of the industry’s worst debt-to-equity ratios, economic uncertainty, operating margin pressures, and rising competition from superior AI products underpin my bearish thesis.
- ADSK Entry Level: Between $305.48 and $312.62
- ADSK Take Profit: Between $270.80 and $279.90
- ADSK Stop Loss: Between $320.00 and $329.09
- Risk/Reward Ratio: 2.39
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