The stock closed Wednesday at $163.28, up 4.3% year to date after falling into correction territory at its 2018 low of $148.60 on Feb. 9. Deere shares are up 9.9% since then. The stock peaked with the market, setting its all-time intraday high of $171.96 on Jan. 26. Deere stock closed Wednesday at 5% below this high.
Analysts expect Deere to post earnings per share of $1.13 when it reports results before the opening bell on Friday, Feb. 16. Some analysts expect strong year-over-year overall sales growth, including a positive foreign-currency impact given the weak dollar. Deere recently acquired Wirtgen, which will add road-construction equipment to the mix. Traders and investors should also look for solid gains in the construction and forestry segments. (See also: Deere & Co.: How it Makes Money.)
The daily chart for Deere
The daily chart for Deere shows that the stock has been above a "golden cross" for more than 52 weeks. The 50-day simple moving average has been above the 200-day simple moving average since May 2, 2016, when the stock closed at $84.29. This indicated that higher prices would continue, and they have. The horizontal lines show that the stock is well above its semi-annual value level of $124.90 and above the monthly and annual pivots of $158.76 and $150.12, respectively. The low of $148.60 held the annual value level of $150.12. My weekly risky level of $173.64 is above the chart.
The weekly chart for Deere
The weekly chart for Deere is positive but overbought, with the stock above its five-week modified moving average of $160.48. The stock is above its 200-week simple moving average at $98.16, which is also the "reversion to the mean," last tested during the week of Oct. 7, 2016, when the average was $85.49. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 83.09, down from 89.88 on Feb. 9 but still above the overbought threshold of 80.00. When the stock set its high during the week of Jan. 26, the reading was 96.91, which was above the 90.00 threshold and was thus an "inflating parabolic bubble" that popped during the stock's correction.
Given these charts and analysis, my strategy is to buy Deere shares on weakness to my annual value level of $150.12 and to reduce holdings on strength to my weekly risky level of $173.64. (For more, see: 10 Stocks That Can Outperform in 2018: Goldman.)