Tickers in this Article: JOYG, BUCY, TEX, ACGO
There is an interesting situation developing in the farm and construction machinery stocks. Many of these stocks were really hammered during the second half of 2008, as it became quite apparent that the economy was in a recession and possibly headed towards a depression. Much like the general markets, these stocks rallied very sharply off their March lows as it became apparent that the world wasn't going to end. Many of these stocks have continued to rally after clearing bases that had been developing for several months. Usually a breakout after a healthy consolidation leads to a sustained move higher, which would hint at higher prices for many of these stocks.

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Joy Global, Inc. (Nasdaq:JOYG), for instance, is trading at 52-week highs after clearing a base in September. JOYG had been in a base since June, testing the $42-43 level a few times. It finally cleared this level in September, and managed to stay above it for a couple of weeks. It came back for a retest in early October before bouncing sharply to new highs. JOYG remains above rising 20- and 50-day moving averages and in an intermediate term uptrend.


Bucyrus International, Inc. (Nasdaq:BUCY) had more than tripled in price from March through June, before topping out at $34.31. It then settled into a consolidation before testing the same level two months later. Often when a stock tests a level several times, it will solidify that level as an area of importance, as many shares have exchanged hands. Notice that once BUCY was able to clear the $34 area, it became an area of support. There was a dip under this level in October that found a surge in buying interest. BUCY is also at 52-week highs and looking strong.


Terex Corp. (NYSE:TEX), is another machinery and construction stock that recently cleared a base and is at 52-week highs. The base had some wild swings with TEX dropping from near $18 down to $10 and back full circle in the span of a few months. Once TEX was able to clear its base in September, it tested the breakout area and surged to new highs shortly thereafter. While TEX is probably a little over extended here, it remains in a bullish posture overall.


The chart for AGCO Corp. (NYSE:AGCO) is showing price action that is in direct contradiction to its peers. Rather than clearing a base and heading to 52-week highs, AGCO is trading at the bottom of the base and threatening a breakdown. AGCO is also underneath its downwards sloping 20- and 50-day moving averages. While it's possible that AGCO could find support in this area, it has been performing poorly versus its peers and would be a possible short candidate if the group turned lower.


Bottom Line
Despite the differences in some of these charts, the key level to watch on the downside is the same. The October low would be an area that would signify a significant change in character and possibly some movement to the downside. However, the technical picture for this group remains pretty strong, with the majority of these stocks at 52-week highs. More likely, these stocks will find buying support on pullbacks and should be watched for possible trading opportunities.

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Charts courtesy of www.stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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