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