Did You Last Week’s Rally in Deere DE? A Closer Look

Sep 5, 2010: 6:14 PM CST

Did you see the strength in Deere & Co (DE) last week?

If you missed it, here’s a closer look and what it might mean for the bigger picture if the stock breaks above key resistance to new recovery highs.

The chart above shows the Daily Structure and recent strength in DE – specifically last week’s solid break above the “flag-like” trendline at the $64 level and the sharp rally that took price back to the key overhead price resistance that stands between the stock and a fresh new 52-week high.

That’s a big deal, as Deere & Co is a leading manufacturer and provider of agricultural equipment worldwide, similar to Caterpillar (CAT).

For a comparison, Caterpillar had a similarly strong rally last week and also is nearing a break to new 52-week highs.

That’s bullish for the agricultural/equipment sector and generally bullish for the broader economy – in a sense.  Investors might do well to watch these two ‘heavy machinery’ stocks for further clues as to the potential future of agriculture and manufacturing.

If companies need use of heavy machinery, it could be because they are planning on expanding in the future and that’s bullish for stocks.

For now, keep focused on the $69/$70 level for signs of continued strength and possible breakout.

Let’s pull the perspective back to the Weekly chart to see what a breakout might mean.

As you can see, shares of Deere (DE) followed a rising parallel trend channel with current boundaries at the $72 (resistance) and $60 (support) levels.

The moving averages on both the weekly and daily charts are in the “Most Bullish Orientation” possible – suggesting further upside potential.

There’s a little bit of horizontal price resistance coming from the mid-2008 price highs at the $70 level, so that’s the level investors need to be watching for a clean breakout – or price failure at overhead resistance.

I would continue to watch these stocks closely to see if buyers can push shares above their respective breakouts, and the bullish signal that would send for the stock market with these stocks reaching new 52-week (and new recovery) highs.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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