AGCO Corp. (AGCO) was last reviewed at the end of June 2016, and we liked the long side: "Existing longs with a low cost basis should hold. No position in AGCO? I would look to be a buyer in the coming weeks in the $44 to $42 area, risking a weekly close below $41."
More than a year later, we can look back and see it was pretty good advice as prices did correct and then turn much higher. After two strong legs to the upside, the indicators are wavering a little and a new strategy is necessary.
In this daily bar chart of AGCO, above, we can see how prices have pulled back this month to close below the rising 50-day moving average line. Prices came close to the rising 200-day moving average line earlier today, but they have firmed. The daily On-Balance-Volume (OBV) line has turned lower the past few weeks, signaling more aggressive selling. In the bottom panel, the 12-day momentum study has made lower highs from May to July as prices have made higher highs. These two paths describe a bearish divergence and probably foreshadowed the current price weakness.
In this weekly chart of AGCO, above, you can see prices are still well above the rising 40-week moving average line. The OBV line on this weekly timeframe is still positive, but the Moving Average Convergence Divergence (MACD) oscillator is crossing to the downside above the zero line -- a take-profits sell signal.
In this Point and Figure chart of AGCO, above, we can see the August selloff and a possible downside price target of $56.
Bottom line: AGCO is trying to reverse its weak performance today but it may fail. If prices see renewed selling next week and close below the 200-day moving average line, we could weaken to the Point and Figure target of $56. I would look to nail down some profits on AGCO and see if we get a better buying opportunity in the next three months.
