A Multi-Year Breakout For John Deere $DE!
Deere & Company $DE: These Tractors Are Born To Run- So Is Their Stock!
I just got back into my office from a visit to our family cattle ranch in beautiful Western Montana…
Our spread has been in my family since the early 1950s. I spent my teenage and young adult years on the ranch doing the things every rancher does- putting up hay in the summer, and feeding that same hay out to hundreds of cows all winter.
Of course, there’s a plethora of smaller, yet equally challenging chores revolving around those two larger undertakings. Ask anyone that has been in the business a few decades and they’ll tell you the same thing- ranching is a labor of love.
I make it a point to get out of my office in the city and back to my Western roots a few times each summer. Early July in rural Montana is when tractors start entering the fields to cut hay that has grown since the frost left the ground in early April.
Speaking of tractors…
Our ranch owns a number of John Deere tractors and associated equipment to assist with the routine tilling, seeding, packing, digging, swathing, baling, pulling, and stacking that occurs each year.
In case you’re unaware, these heavy machines have a reputation for being the best-built tractors in the world. They’re dependable and they last longer than the competition.
No doubt about it, ranchers love the trademark green workhorses!
What does all this tractor talk have to do with commodities?
Well, since John Deere makes machinery that helps farmers and ranchers bring agricultural commodities out of the ground, it’s fair to say their stock is a nuts and bolts play on the asset class.
And it just so happens Deere & Company $DE is experiencing an unusual, and potentially profitable, technical situation.
Take a look…
As you can see from this long-term monthly chart, $DE is breaking to new multi-year highs in recent trading. But what really has me excited is the technical pattern (red lines) that has formed in shares of the machinery producer since early 2011.
The pattern- called an ascending triangle- is highly indicative of additional, and possibly substantial, upside in $DE.
How does the pattern work?
Over the past few years, $DE has traded in a consistently tighter range. As you can see, the red trend lines in the chart above are converging on the right side of the chart.
Here’s the deal…
Once shares break above the highest trend line, investors’ buy stops are triggered, which immediately pushes prices higher. And when more investors take notice of the bullish price action, additional buying pressure flows in.
How much upside could we see in $DE?
Since this technical pattern has taken four years to build, the ongoing breakout in the producer of green farm machinery could be quite large. In fact, I wouldn’t be surprised to see $DE trading at $110 or higher in coming months.
But let’s be clear on something…
With Greece slipping closer to bankruptcy, there’s a very good chance we see a substantial dose of broad market turmoil soon.
As a result, bears will have one last chance to make a stand in $DE. Should the worst-case scenario arise in the Greek debt debacle, we could see the shares break below the lower red trend line at $85.
That’s why if you’re going to get long $DE from current prices, you should place stop loss order in the high $84 area.
Bottom line…
While there is a bearish threat due to the situation in Greece, the upside profit potential in $DE currently outweighs the downside risk!
Until Next Time,
Justin Bennett
***Disclosure*** Editor Justin Bennett has a long position in $DE.
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at http://commoditytradingresearch.com/free-sign-up.
Category: Commodities
