Emerging ‘Buy’ Alert for Deere & Co.

Dear Reader,

Yesterday, we looked at a Daily Price Chart for Salesforce.com, Inc. noting that the stock has been making a series of new 52-Week Lows.

For today’s Trade of the Day e-letter we will be looking at a daily price chart for Deere & Co. stock symbol: DE.

Before breaking down DE’s daily chart let’s first review what products and services the company offers.

Deere & Company manufactures and distributes various equipment worldwide. The company operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. The Production and Precision Agriculture segment provides mid-size tractors, combines, cotton pickers and strippers, sugarcane harvesters, harvesting front-end equipment, sugarcane loaders, pull-behind scrapers, and tillage and seeding equipment, as well as application equipment, including sprayers and nutrient management, and soil preparation machinery for grain growers.

Now, let’s begin to break down the Daily Price chart for DE stock.

Below is a Daily Price chart with the 50-Day EMA and 100-Day EMA for DE.

50-Day EMA and 100-Day EMA ‘Buy’ Signal

The 50-Day Exponential Moving Average (EMA) and 100-Day EMA are moving average indicator lines that can provide buy and sell signals when used together. When the shorter-term 50-Day EMA crosses above or below the longer-term 100-Day EMA, this provides either a buy or sell signal depending on which direction the stock price is moving.

50-Day EMA line Above 100-Day EMA = Price Uptrend = Buy signal
50 Day EMA line Below 100-Day EMA = Price Downtrend = Sell signal

When the 50-Day EMA (blue line) crosses above the 100-Day EMA (red line) this indicates that the stock’s buying pressure has begun to outweigh the selling pressure signaling a ‘buy’ signal. When the 50-Day EMA crosses below the 100-Day EMA this indicates that the selling pressure has begun to outweigh the buying pressure signaling a ‘sell’ signal.

Buy DE Stock

As the chart shows, on October 10^th, the DE 50-Day EMA, crossed above the 100-Day EMA.

This crossover indicated the buying pressure for DE stock exceeded the selling pressure. For this kind of crossover to occur, a stock has to be in a strong bullish trend.

Now, as you can see, the 50-Day EMA is still above the 100-Day EMA meaning the ‘buy’ signal is still in play.

As long as the 50-Day EMA remains above the 100-Day EMA, the stock is more likely to keep trading at new highs and should be purchased.

Our initial price target for DE stock is 457.00 per share.

Profit if DE is Up, Down or Flat

Now, since DE’s 50-Day EMA is currently trading above the 100-Day EMA and will likely rally from here, let’s use the Hughes Optioneering calculator to look at the potential returns for a DE call option spread.

The Call Option Spread Calculator will calculate the profit/loss potential for a call option spread based on the price change of the underlying stock/ETF at option expiration in this example from a 10.0% increase to a 10.0% decrease in DE stock at option expiration.

The goal of this example is to demonstrate the ‘built in’ profit potential for option spreads and the ability of spreads to profit if the underlying stock is up, down or flat at option expiration. Out of fairness to our paid option service subscribers we don’t list the option strike prices used in the profit/loss calculation.

The prices and returns represented below were calculated based on the current stock and option pricing for DE on 12/21/2022 before commissions.

Built in Profit Potential

For this option spread, the calculator analysis below reveals the cost of the spread is $625 (circled). The maximum risk for an option spread is the cost of the spread.

The analysis reveals that if DE stock is flat or up at all at expiration the spread will realize a 60.0% return (circled).

And if DE stock decreases 10.0% at option expiration, the option spread would make a 17.0% return (circled).

Due to option pricing characteristics, this option spread has a ‘built in’ 60.0% profit potential when the trade was identified*.

Option spread trades can result in a higher percentage of winning trades compared to a directional option trade if you can profit when the underlying stock/ETF is up, down or flat.

A higher percentage of winning trades can give you the discipline needed to become a successful trader.

The Hughes Optioneering Team is here to help you identify profit opportunities just like this one.

Interested in accessing the Optioneering Calculators? Join one of Chuck’s Trading Services for unlimited access! The Optioneering Team has option calculators for six different option strategies that allow you to calculate the profit potential for an option trade before you take the trade.

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One of the big advantages to trading option spreads is that spreads allow you to trade high price stocks like Amazon, Google, or Netflix for as little as $350. With an option spread you can control 100 shares of Netflix for $350. If you were to purchase 100 shares of Netflix at current prices it would cost about $30,000. With the stock purchase you are risking $30,000 but with a Netflix option spread that costs $350 your maximum risk is $350 so your dollar risk is lower with option spreads compared to stock purchases.

Get Trade Insights Directly From Chuck

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See what he’s trading and when with his exclusive Inner Circle Trading Service where he will send you his hand-picked stock and option trades.

Just call Brad at 1-866-661-5664 or 1-310-647-5664 to join or CLICK HEREto schedule a call!

Wishing You the Best in Investing Success,