Leo Fasciocco is a technical expert who focuses exclusively on finding breakout candidates. In his Ticker Tape Digest, he looks to agriculture equipment manufacturer Deere & Co. (NYSE: DE).
"Deere, with annual revenues of $24.8 billion, makes agricultural, industrial, forestry, and lawn-care equipment. DE is benefiting from the strong demand for its products in the farm sector. The company is also expanding aggressively in Russia.
"DE has broken out from a 13-week flat base. Its long-term chart shows DE soaring from 20 in 2003 - the start of the prior bull market - to 92. It has been a big winner in the big cap sector. The stock has gained 65% in the past 12 months versus a 5% drop in the S&P 500 index.
"The stock is in a base bracketed between roughly 78 on the downside and 91 on the upside. The breakpoint was set at the key upside resistance of the base. Deere has plowed through that resistance on increasing volume.
"DE's technical indicators are very bullish. Its momentum indicator remains very bullish and the accumulation - distribution line broke out to the upside a few sessions ago.
"This year, analysts predict a 30% jump in DE's earnings to $5.21 a share from $4.01 a year ago. The stock sells with a price-earnings ratio of 17, which is reasonable. Next year, profits are expected to increase 19% to $6.17 a share from the anticipated $5.21 this year.
"The stock's institutional sponsorship is excellent. Several top performing funds have been buyers lately, very few have sold. The largest fund holder is American Funds Fundamental Investors with a 2.4% stake. The 5-star fund was a recent buyer of 4.7 million shares. Also, 5-star rated Vanguard Wellington Fund purchased 3.2 million shares and 5-star rated CGM Focus Fund added 3.2 million shares.
"Overall, DE is riding the wave in the agricultural sector. We are targeting DE for a move to 110 within a few months, or sooner. A protective stop can be placed near 88."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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