Be Wary Of Deere’s (DE) Trend Reversal

The bears swooped in on Wall Street right at Monday’s opening bell as weaker-than-expected China GDP data sent a wave of worry across equity markets around the globe. Profit taking pressures also returned to the precious metals market at the start of the week, sparking a massive sell-off in gold; the yellow metal dropped upwards of $150 an ounce on Monday, sending the prices well below the $1,400 mark in just a matter of hours [for more market news and analysis subscribe to our free newsletter].

Amid the ongoing tug of war between the bulls and bears, agriculture and forestry equipment manufacturer Deere & Co. (DE) presents an intriguing opportunity at the moment that warrants a closer look from swing traders looking to get a piece of the action on Wall Street.

Chart Analysis

Consider Deere’s one-year daily performance chart below. This agriculture stock has enjoyed a nice steady uptrend (green line) since bottoming out in early June of 2012, and then moving up through its recent peak of $95.60 a share. DE’s decline over the past two months appears to be a healthy correction when considering the longer-term uptrend at hand along with the stock’s ability to hold its head above the 200-day moving average (yellow line) in recent weeks. Plain and simple, DE’s chart looks like a “buy” at the moment as traders can establish a long position in anticipation of a rebound while still closely managing downside as this stock is trading near a major support level (yellow line).

Click to Enlarge

Before jumping in long, investors should take note of the potential trend reversal that may be brewing; since peaking at $95.60 a share in late January of 2013, this stock has posted a series of consecutive lower-highs (red line) and lower-lows, perhaps hinting at a potential trend reversal. As such, we advise using a tight stop-loss for anyone looking to take a long position at current levels in case our bearish suspicions prove correct [see 5 Commodity Trading Mistakes You Could Be Making].

Outlook

DE’s chart pattern is sending mixed signals as the ongoing correction can be interpreted as either a healthy pullback or a sign of a trend reversal. From a technical perspective, this stock has major support around $82-$84 a share; in terms of upside, DE could face selling pressures as it nears the $88 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing

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Commodity HQ is not an investment advisor, and any content published by Commodity HQ does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities or investment assets. Read the full disclaimer here.

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