Battle of the Tractors: Deere vs Caterpillar
- Posted by Greg Harmon
- on October 30th, 2012
Many eyes are focusing on the price action in Deere, $DE. After it broke above 83.75, resistance since February, the stock looks ready to keep traveling higher. Currently attempting to move higher out of a bull flag it has resistance at 87 and 88 before free air to move higher and the Measured Move would take it to 90. With support from a bullish and rising Relative Strength Index (RSI) and a
Moving Average Convergence Divergence indicator (MACD) that is crossing to positive it is truly a great trade set up. But if you move a little earth, digging below the surface, there might be a better play in beaten up Caterpillar, $CAT. The ratio chart below of Caterpillar to Deere carries a lot of information. There are two trendlines that help define the bullish and bearish picture over the last 3 years, with the pertinent information today in the green support line and red resistance line in the bearish phase for the ratio. Also note the marked areas on the RSI at the top, when it has moved into technically overbought or oversold areas, coinciding with the ratio at the trend line or vastly extended. Finally the MACD signal crosses at the bottom have been the trigger when all three line
up. And the ratio is signaling a trade trigger right now with the RSI bottomed, the MACD crossing up and the ratio on support. The moves off of the bottom have averaged over 20%, and a 20% move would just coincide with a touch of the resistance trend. That is a 20% move in Caterpillar relative to Deere. Think of what that means. If Deere does not move at all then it equates to a move to near 102. But since Deere looks poised to move higher towards 90 the Caterpillar move would rise to over 105. There is nothing wrong with driving a Deere higher to 90, but the better opportunity may be found in Caterpillar.
Join the Dragonfly Capital Views Premium Membership
Sign up here to get deeper analysis and nearly 50 trade ideas every week.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Put the Regionals on Your Radar
- Be Flexible with Flextronics
- Premium Earnings 4-22-14
- Low Volume Everywhere, But Not Here
- Netflix Earnings Trade Ideas
- Premium Earnings 4-21-14
- Top Trade Ideas for the Week of April 21, 2014: Bonus Idea
- Top Trade Ideas for the Week of April 21, 2014: The Rest
- What You Liked Most on Dragonfly Capital This Week
- Top Trade Ideas for the Week of April 21, 2014: The Rest Premium