Click charts to enlargeThese two charts basically trade in lockstep. The one at the top is Agco (AG). The one below it is Deere (DE). They are both in long term uptrends as shown by the chart of AG.
The chart of AG is a logarithmic chart. It would look parabolic if it were an arithmetic chart with such a long time frame (24 months). It shot past the top of its channel last November, but didn't get all that far before returning to earth.
Now both stocks are roughly at the midpoints of their channels, and possibly in the process of breaking through resistance. We drew a sloping resistance line on Ag, and a horizontal one on DE. Either way you slice it, there may be a breakout in the making. They ran up, retraced 50%, and are running up again. We bought a beginning position in DE late in the day at 90. These stocks are slow moving relative to the other Ag names, and will likely have to be held for a longer time frame. This is fine, as we like to have several long positions open at any given time.
They offer a respite from the same 'ol commodity/fertilizer play that's been dominating the long side of our portfolio for some time. Although, truth be told, it's not exactly diversification. Both companies make farm equipment. We figure that if sales of fertilizer are up, they must be selling tractors, too. How's that for fundamental analysis? Actually, the reason they're in an uptrend is not that important to us. We're just hoping they continue their moves higher so we can use resistance as support and set up a mental stop loss at 90. That's the plan, anyway. Of course at 95 (top of channel), we would sell.
9 comments:
Hi Snot,
Thank you for sharing your opinions. What do you think about TITN?
It's an amazing chart, just not our style. We like the larger, more stable companies.
TITN has only 6 months of trading history, a market cap of under 300M, and daily trading volume of only 400k of so. Stocks like that either hit it big, or tank in the blink of an eye.
Still, there's nothing wrong with holding a stock with a chart like that! We would just not hold it through earnings reports, and would be aware that if it closes below its 50dma, it's run could be over for a very long time.
Hi Snot
What do you think about LNN?
Thanks
Manoj
Damn these companies are almost shooting off exponentially. They look overbought though at the moment. Both of TITN and LNN.
Hi Snot, what you think of NM?
Hi Snot,
You were right on calling SKF over. What do you think about UYG? I'm probably a little bit early on this one, but it sure looks like it's on the verge of pushing up and out of it's very long down trending channel. And with the bulk of the fins having reported and the sky didn't fall...
Also- thanks for the reply on FXP a few days ago. I was holding out for the CPI to push it up as well, but when that didn't happen I couldn't take it anymore and bailed out at 80 for a loss. That and China's greater than expected GDP number made me skittish. I've never seen anything move so frustratingly as FXP. But my gain on SKF was about 2.5x as much as the FXP loss, and I wouldn't have played either if you hadn't brought them to my attention, so thank you and I owe you a beer! (or 12)
Craig
LNN, great pin action off the whole Ag space. If they're selling fertilizer and tractors, then surely they're selling irrigation systems. We like LNN as a fun trade... don't bet the farm. We sometimes buy some stocks just because we like the story and the chart, but we don't take them too seriously. Over the years, half of them have done well and half of them haven't. LNN looks like it's got everything going for it, but we prefer the larger companies with institutional sponsorship, a little more exposure, and a larger market cap. If you had to pick a small cap to buy as a fun trade, LNN is a great pick. Just be careful at earnings time, because these lesser known stocks can lose massive percentages overnight, and unlike the larger names, no one steps in to prop them up.
Craig, we're going to remain bearish until the Dow breaks resistance at 12750. (S&P 1400)
That's the area that everyone is waiting for us to break through. Once we break it, we'll be in a new trading range and there will be upside. We're not buying anything heavily right now considering that ceiling is so close overhead, including financials. When the indexes are given the green light, all of the sectors should benefit.
If you made more on SKF than you lost on FXP, then you're timing is very good! We sold CF today at 153.25 and repurchased it at 149.5
We neither caught the exact top nor the exact bottom, but anytime you can pull that off, it serves to lower your break even price and lower the risk of being in the position. Hopefully you've been doing that with a portion of your positions, too.
NM-
On a long term chart, NM has completed a full correction back to the trendline it established in the second half of 2006.
It looks like it wants to resume its climb, but it hasn't broken out yet. This stock responds uncannily well to its 100dma. If you look at its history, you would think that computer trading programs are set right at this line. Ever since it began its run in mid 2006, it has used this line multiple times to find its bottom. Now that its in a downtrend, its using the same line as resistance. It closed within pennies of its 100dma today. The first step for it to begin a new uptrend would be closing above the 100dma. Then, it would be confirmed if the 100dma starting to turn upward. A stock trading above its uptrending moving average is in an uptrend. NM looks like it may well get there very soon. We aren't turning bullish on this market until the indexes break resistance (February's highs). If NM can establish an uptrend, we would consider it a buy, but not a "bet the farm" kind of trade. We don't like the size of the company enough to make it a core position. We prefer larger companies with greater institutional sponsorship. And by the way, with GOOG's massive beat tonight, the only thing that matters right now is tech:)
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