Trade The Channel In Deere & Co. (DE)

The bull train continues full steam ahead on Wall Street much to the bears’ growing frustration. Major equity indexes are still relentlessly climbing higher, posting fresh multi-year highs by the day it seems. Every minor pullback on the stock front has welcomed buyers, showcasing the sheer euphoria permeating the marketplace, which is rightfully making some worried that a steep correction is lurking just around the corner. Commodities overall continue to drift lower as the strengthening U.S. dollar is keeping a lid on spot prices [for more market news and analysis subscribe to our free newsletter].

Chart Analysis

With natural resource futures prices facing headwinds from a rising dollar, investors should look to the equity front for investment opportunities that stand to benefit from all of the euphoria on Wall Street. One agribusiness stock in particular, Deere & Co. (DE), presents an attractive opportunity in the current environment; this security is in a long-term uptrend, boasts very solid fundamentals, and it recently completed a correction, thereby creating a lucrative entry point for those eager to participate in the ongoing bull market.

Click to Enlarge

Consider the chart above and take note of DE’s uptrend. Notice how this stock has been climbing higher within a crudely defined price channel (blue lines) since bottoming out in late August of 2012; DE has a tendency to correct lower after trading along its upper resistance boundary while also rebounding higher after nearing the lower support boundary [see 5 Commodity Trading Mistakes You Could Be Making].

Despite trading lower over the past two weeks, this stock appears to have completed a healthy correction. DE is holding its ground above $90 a share, which is noteworthy when considering that it previously rebounded off the $85 level at the end of 2012; this suggests that the stock is establishing a rising level of support for itself, which is quite bullish. Given the technical pattern at hand, jumping into a long position at current levels may appeal to some. DE is trading right on a support level within its longer-term channel, which allows traders to closely manage their downside risk by setting a stop-loss right around or underneath support while still exposing themselves to the potential upside.


If the current price pattern holds up, DE should rebound higher over the coming weeks; in terms of upside, this stock has resistance at the $95 level. On the other hand, if selling pressures persist, DE could sink below its current support and break the channel; in terms of downside, DE has major support around $85 a share. 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.

This entry was posted in Agriculture, Commodity Trading Outlook, Commodity Trading Trends, Trading and tagged . Bookmark the permalink.

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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