Deere & Company (DE) shares rallied 1.01% to $110.27 on Friday after reporting better than expected first quarter earnings. Earnings came in at $0.61, a 10 cent beat of the analysts’ estimate of $0.51. Revenue rose 2% to $5.63 billion, and was also better than the expected $4.63 billion forecast. The company also raised its 2017 revenue growth forecast from -1% to +4% year over year.
CEO Allen, “John Deere has started out the year on a positive note in the continued face of soft market conditions," said Samuel R. Allen, chairman and chief executive officer. "Although the quarter's sales and earnings were somewhat lower than last year, all of our businesses remained solidly profitable. Deere's performance showed further benefits from the sound execution of its operating plans, the strength of a broad product portfolio and the impact of a more flexible cost structure. At the same time, we are seeing signs that after several years of steep declines key agricultural markets may be stabilizing.”
Price action on the DE daily chart shows that the bullish move accelerated once price surged above the 200-day SMA, which currently trades around the $90.12 level. The beginning of the year saw price steadily rally until the $112.18 level. If bullishness continues, the next resistance level could come from the $114.90 level, which is the 161.8% Fibonacci expansion level of the $112 to $107 pullback. Further upside may target the psychological $120 level.
If we see downward pressure return, initial support will come from the $105.70 level. Major support remains the $93-99 region.
The Trade: Buy DE at $109.50, with a stop loss at $108.50 and a take profit at $112.50. The Risk/Reward Ratio is 1:3