Deere & Co. (DE) is trading sharply higher in pre-market activity here on Friday on the heels of a huge second-quarter earnings beat and the company raising its profit outlook for the full year. Let's check and see how the charts of the agricultural equipment giant look.
In this daily bar chart of DE, below, I can imagine this morning's strength with prices in the $390 area. This price during regular trading hours would break the declining 50-day moving average line and put prices closer to the 200-day line. The On-Balance-Volume (OBV) line is likely to continue to strengthen. The 12-day price momentum study in the lower panel was already showing us a bullish divergence with higher lows from March while prices made lower lows. The pace of the decline was already slowing ahead of today's earnings report.
In this weekly Japanese candlestick chart of DE, below, I can see some positive clues. There are lower shadows on two candles in April and May, telling me that traders were rejecting the lows ahead of earnings. Today's anticipated advance should make a large white (bullish) candle and approach the underside of the 40-week moving average line. The OBV line may turn higher for the week. The Moving Average Convergence Divergence (MACD) oscillator is starting to narrow and that precedes a cover shorts buy signal in the weeks ahead.
In this daily Point and Figure chart of DE, below, the pre-market action is not plotted yet. A downside price target is indicated but at trade at $388.41 or higher should start to turn this chart positive.
Bottom line strategy: I would want to be a buyer of DE but will suggest waiting for a minor post-earnings dip on Monday or Tuesday. The risk will probably be $370.
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