Deere & Company (DE) manufactures outdoor equipment for agriculture, construction and snow removal. The stock is up 32.9% year to date and is solidly in bull market territory at 54.5% above its post-election low of $88.61 set on Nov. 8, 2016. The stock set its all-time intraday high of $137.82 on Nov. 20, 2017.
The stock's strength will be put to a test when the company reports earnings before the opening bell on Wednesday, Nov. 22. Analysts expect Deere to report earnings per share of $1.43 to $1.52 on strong year-over-year comparisons for both earnings and revenue growth. One segment to focus on is growth in South America. (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" since April 29, 2016, when it closed at $84.11. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. Notice how the stock tracked its 200-day simple moving average between May 20, 2016, and Sept. 15, 2016, when upward momentum pulled the stock above its 50-day simple moving average, which became a magnet. The price gap lower on Aug. 18 was on a negative reaction to earnings, which proved to be a buying opportunity just above the 200-day simple moving average.
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 $131.76 and well above its 200-week simple moving average, also known as the "reversion to the mean," now at $93.82. This key average was last tested at $85.49 during the week of Oct. 21, 2016. Note how the 200-week simple moving average was a magnet between the week of Aug. 21, 2015, and the week of Oct. 21, 2016. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 87.86 this week, up from 86.49 on Nov. 17 and well above the overbought threshold of 80.00.
Given this chart and analysis, my trading strategy is to buy weakness to my quarterly and semiannual value levels of $127.40 and $109.02, respectively, and to reduce holdings on strength to my weekly risky level of $139.10. My annual pivot is $131.25. (For more, see: Deere to Buy Blue River Technology, Adds Competitive Edge.)