Deere & Company Clearing A Path To the Upside

Futures markets are pointing to slight opening losses as fresh political developments signaled new uncertainty over President Trump’s leadership. His former 2016 campaign chair, Paul Manafort, was found guilty on eight counts of financial wrongdoing, while prior personal lawyer, Michael Cohen, said a candidate for federal office directed him to pay off a porn star “for the principal purpose of influencing” the election. The S&P 500 index today is still poised to break the longest-running bull market in history, fueled by strong earnings, tax cuts and economic growth.

*Source:  Seeking Alpha

Let’s consider Deere & Company (Ticker: DE):

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out four significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on August 21st.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on August 16th.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  Finally, all three predictive indicators are positively sloped adding to my bullish bias.  I want to play the VP continued bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For DE, that yields a target strike of ~$152.00.  You may want to consider the DE September 21st regular monthly expiration 150/152.5 call spread, buying it for $0.50.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.50 and max reward = $2.00. This means that you are getting odds of 4:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.