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Deere in The Headlights (DE)

Posted on October 22, 2020

Nothing runs like an ag stock propped by infinite amounts of Fed stimulus and congressional cash infusions.

You tell ‘em, Sally!

And that’s where we are.

Today’s trade is a play on an overbought Deere stock (NYSE:DE), which has risen 130% since the Wuhan Bat Bottom back in March.

Have a look –

Technically, the stock looks tired –

  1. RSI was overbought for two full weeks through the beginning of September (green box), and
  2. Since then, price has diverged steeply from both RSI and MACD indicators.  This action is indicative of a loss of buying momentum (also in green).
  3. We also see a narrowing range of trade (in red), with a rising wedge pattern now forming.  A break below the bottom red trendline would ignite great deal of technical selling.
  4. And the ‘key’ to that ignition may have been offered just four trading sessions back, with the appearance of a gravestone doji (enlarged, in black), a generally trustworthy reversal signal.

Now, we’d happily look the other way after such a rise if the company in our sights wasn’t an old world manufacturer of nuts and bolts metallica with a market cap of $76 billion.

But that’s exactly what she is.  And there’s no camouflaging it.

Nor might you blind the following numbers –

  • The stock carries a full year trailing earnings multiple of 28,
  • A bloated P/B of 5.74,
  • Offers a nominal annual yield of 1.29%, and
  • Maintains a heavy debt load (Debt/Equity is 3.76).

Have a look now at the weekly chart –

Maximum gain is $18.25.

Many happy returns!

Matt McAbby

4 responses to “Deere in The Headlights (DE)”

  1. M T says:

    Looks like it’s inching towards the ledge – going to dust this one off and have a go:

    “To buy 1 Combo means:
        1: Sell 1 DE Dec18’20 250 CALL      2: Buy 1 DE Dec18’20 260 CALL      3: Buy 1 DE Dec18’20 250 PUT      4: Sell 1 DE Dec18’20 230 PUT”

    Credit of .6 (including commissions) on entry…buck em down!

  2. Jim Rodgers says:

    Are you sure it knows how to dive? I thought the only way DE and CROX could go, is up!

  3. Jim Rodgers says:

    Now that’s gettin ’em in the shorts!

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