Deere & Company (DE) makes equipment for farming, snow removal, lawn mowing and construction. An improving economy and potential infrastructure spending could make the weekly chart for Deere positive on a rally following an upbeat earnings report and solid forward guidance. The stock closed Wednesday at $147.35, down 5.9% year to date and in correction territory at 15.9% below its 2018 high of $175.26 set on Feb. 16. The stock has recovered by 12.3% since setting its 2018 low of $131.26 on May 3.
Analysts expect Deere to post earnings per share between $3.33 and $3.40 when the company reports results before the opening bell on Friday, May 18. The key will be demand for agriculture and construction equipment sales, as those segments will determine the company's performance in the key farming and housing industries. A benchmark is beating the 34% year-over-year revenue growth seen in the year-ago quarter. (See also: 9 High-Return Stocks for a Shaky Market: Goldman.)
The daily chart for Deere
Shares of Deere have 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. Note how weakness on May 15 held the 200-day simple moving average of $143.58. The horizontal lines show that the stock is well above its semiannual value level of $124.90 and below my annual pivot of $150.12. My quarterly risky level is $166.26.
The weekly chart for Deere
The weekly chart for Deere will end this week positive it the stock closes Friday above its five-week modified moving average of $147.49. The stock is well above its 200-week simple moving average at $102.10, 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 rise to 23.79 this week, up from 19.25 on May 11 and rising above the oversold threshold of 20.00. The technical dynamics change quickly – during the week of Jan. 26, the stochastic reading was 96.91, well above the 90.00 threshold as 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 semiannual value level of $124.90 and reduce holdings on strength to my quarterly risky level of $166.26. My annual pivot of $150.21 has been a magnet since Feb. 9. (For more, see: 6 Stocks at High Risk in a Trade War.)