Prices of Deere (DE) have been banged up a bit in recent months, but our favorite technical indicators are pointing to a turnaround in the making.
Chartists should be able to find a number of constructive clues in this chart, above. First, let's examine what went on in August. Prices were slashed $15 to $20 in a hurry with a huge gap in the middle of the plunge. Volume surged to around 15 million shares in sort of a capitulation trade. Prices went still lower in September with another gap, but on much lighter volume. DE was getting sold out. Shares of DE staged a sharp rebound in October, including a testing of the declining 50-day simple moving average. Last, the August-October decline generated a bullish divergence versus the momentum study, meaning the rate of decline slowed in September vs. August.
This chart, above, shows us how the 40-week moving average has performed on a stock that has largely traded sideways. This chart also shows us the DE is basing in general area of the lows that held in 2012. Bottom line: Prices for DE may continue to trade sideways for a while, making a bigger base pattern, but a rally over the October highs would turn the trend up and generate a buy signal vs. the 50-day moving average. A sell stop below $73 should work.