DE has shed 11% year-to-date, but just flashed a buy signal
Shares of Deere & Company (NYSE:DE) are slightly lower today, continuing their volatile run on the charts after topping out at a mid-February record peak of $175.26. The heavy machinery manufacturer's stock is down 0.5% at $139.67, at last check. Notably, however, DE has now pulled back to within one standard deviation of its 320-day moving average.
According to Schaeffer's Senior Quantitative Analyst Rocky White, there have been two other times over the last three years where DE has pulled back to this trendline after trading above it for a significant length of time. Following those two prior signals, the stock went on to average a one-month gain of 16.63%, with both of the returns positive.
Another move of this magnitude would put DE around $162.89 one month from now -- back above the $160 level, which has acted as a ceiling of resistance for the shares since May. Continued short-covering activity could help support another 320-day bounce for Deere stock; following a 15.8% decline in the most recent reporting period, it would still take over three days for shorts to buy back all of their shorted DE shares.
Deere isn't set to report earnings until mid-August, which means traders expecting a short-term rally can buy the stock's front-month options at affordable prices, from a volatility perspective. Schaeffer's Volatility Index (SVI) of 29% arrives in the 30th annual percentile, as short-term calls and puts have priced in lower volatility premiums less than one-third of the time in the past year.
Plus, the security has consistently rewarded premium buyers over the past year. This is based on DE's Schaeffer's Volatility Scorecard (SVS) reading of 96 out of a possible 100, which indicates the equity has regularly exceeded the volatility expectations priced into its options.