Shares of Adobe Systems Inc (ADBE) are hitting a new annual low today as they break below last week's worst levels. This is worth pointing out as the stock is still somewhat of a Wall Street darling. Here is what I am looking at.

According to Zacks, 11 of 18 analysts (61 percent) rank the stock with a "buy" rating. This is on a stock that has lost 40% in the last 13 weeks.

I last discussed Adobe in September, ahead of the company's earnings report. The stock was trading at support near 38 and I offered some cautious comments about some optimism that was creeping. As the daily chart below shows, I was wrong on the earnings call. The stock staged a small bounce after earnings but then did reverse and violated that near-term support.

To get the big picture view, we need to look to the weekly chart. That shows a potentially problematic situation. With the near-term support left far behind, we find the stock flirting with a break below the zone near 25. This area marked both the September 2005 and August 2006 bottoms.

The saving grace here may be that the shares are very oversold. Like many stocks, the weekly Relative Strength Index (RSI) is hitting multi-year lows. This suggests that it shouldn't take much buying demand to turn the tide. However, the risk is that the Street has been caught on the wrong side of this pullback. At the very least, I think there are some trapped bulls who may be looking to sell into any rally attempts. This creates a downgrade risk to be aware of.

Chart Courtesy of Thomson Financial

Chart Courtesy of Thomson Financial