Seeking Alpha
Profile| Send Message| ()  

by Bryan McCormick

The farm equipment maker is up more than 300 percent since the lows of 2009, but there is one sign on the horizon that isn't entirely bullish.

Deere & Co.'s (DE) stock has been one of the success stories of the rally off the lows of 2009. Since DE hit that low at $24.51, the stock at its recent peak was up more than 300%.

While that is an amazing recovery, there is one sign on the horizon that isn't entirely bullish for the farm equipment maker. And it is a sign we should all be familiar with after the broader indexes, notably the S&P 500, hit what were thought to be unbounded highs in 2007.

The red horizontal line that I have drawn on the chart below is the previous price peak from 2008 at the $95 area. Recently the stock broke above that level but fell back rather quickly.

DE

(Click chart to expand)

In many respects this is not unlike the behavior we saw with the S&P 500 (SPY), which took many years to reach and then slightly exceed its previous highs. It too then faltered and a major correction ensued.

Although the stock certainly does not have to follow this path, it does set a new obstacle for DE to overcome. Asset prices that meet old highs and then fail to continue powering through at a minimum can enter substantial corrective phases. That already appears to be happening when we look at the weekly chart above, where the 10-week moving average, in orange, has been tested.

In a bull phase that test would be a potential buying opportunity and likely would be if the stock were not poised so close to resistance. That $95 area and the behavior of the stock around the 10-week moving average will need to be followed closely.

(Chart courtesy of tradeMONSTER)

Source: A Dark Cloud Over Deere?