The American corporation that manufactures agricultural, construction, and forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment, Deere & Company (NYSE: DE) seem to be ready for a price correction according to its latest charts.
Bearish Indications
#1 Rising Wedge Pattern: The daily chart shows that the stock has been forming a rising wedge pattern during the past few months. This is a bearish pattern and is marked in pink color lines in the daily chart. Once the stock breaks down from the rising edge pattern, it has the potential to move lower in the near-term.
Daily Chart – DE
#2 MACD below signal line: The MACD line (blue color) is currently below the MACD signal line (orange color), indicating possible bearishness.
[hana-code-insert name=’adsense-article’ /]#3 Bearish Stochastic: The stochastic in the daily chart is currently moving down from overbought levels.
The %K line is also below the %D line. All these indicate possible bearishness.
#4 Strong Resistance Level: There is a strong resistance level nearby for the stock, which is marked as an orange dotted line.
At this resistance level, multiple tops have been formed.
This indicates that the stock looks to be losing steam when attempting to cross above that level, as there seems to be an influx of sellers. This is a possible bearish sign.
#5 Channel Resistance Level: The weekly chart shows that the stock was consolidating within a channel during the past several months. This channel is marked in pink color lines in the weekly chart below. The stock was not able to cross above the upper rail of the channel till now. This looks like a good sell level for the stock.
Weekly Chart – DE
#6 Bearish Stochastic: In the weekly chart as well, the stochastic is currently moving down from overbought levels. The %K line is also below the %D line. All these indicate possible bearishness.
#7 CCI moving down: The weekly chart shows that the CCI is moving down after reaching overbought levels. This is a possible bearish sign.
Recommended Trade (based on the charts)
Sell Levels: If you want to get in on this trade, the ideal sell level for DE is below the price of $156.
TP: Our target prices are $145 and $130 in the next 3-6 months.
SL: To limit risk, place a stop loss at $163. Note that this stop loss is on a closing basis.
Our target potential downside is 7% to 17% in the next 3-6 months. For a risk of $7.00, our target rewards are $11.00 and $26.00. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers nearly 2x to 4x rewards compared to the risks.
Risks to Consider
The stock may reverse its overall trend if it breaks upwards from the rising wedge pattern with high volume. The breakout of the stock could also be triggered in case of any positive news, overall strength in the market, or any regulatory changes in its sector.
Happy Trading!
Tara
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