The market environment has been treacherous so far this year. While there have been pockets of strength with sustained moves, many investors are benefiting from quicker profit taking. DE stock is just another swing trading example.
A Long Base In DE Stock
Deere & Co. doesn't have the most impressive performance over the last year. It based during that time and has a flattened 200-day moving average line. But after its impressive move at the end of 2020 and early 2021, maybe a break was due.
This year started on a strong note as DE stock jumped back above its 200-day line (1). We gave it a try a couple weeks into the year but got shaken out on the way to another test of the 200-day line (2). What followed next convinced us to give DE stock another shot. It was a nice orderly pullback with volume drifting lower (3). It looked like a handle on a six-month base.
We added Deere stock back on SwingTrader on Feb. 8 as it broke above its short downtrend (4). Volume ticked well above average and the relative strength line was close to a recent high.
Taking Profits Quickly When You Have Them
For DE stock, our entry was early in the trading session at 380.45 and by the end of the day, we already had a gain of 10 points. It's not our intention to day trade, but in this market environment, we've been eager to take our first third of profit no matter how quickly it comes. With the first third locked in with a gain, you can give the remainder some room and still come out ahead on the trade even if it goes against you.
In this case, DE stock followed up nicely the next day with nearly another 10 point gain (5). The Nasdaq composite gapped above its 21-day moving average line on that day and we decided to give it a little more room since our exposure was low. While it finished well off its highs, DE stock still had a gain of 1.4% for the day.
Keeping The Trade Positive
Over the next few days, DE stock had trouble rallying. It would start strong and close weak. The 400 price level seemed to act as resistance (6). Plus, the market indexes fell back below their 21-day lines.
We finally exited Deere stock as it fell below its 5-day moving average line (7). Maybe the stock needed more time. But earnings were around the corner and we don't like to hold a stock too long if it isn't performing. Our exit still gave us a small gain from our entry and our earlier profit taking increased the gain for the trade.
That decision saved us a 60-point drop in DE stock over the next week (8). But again, we don't want to let the stock drop off our radar. A lot of volume came in on the rally up and DE stock looks like it could set up for another swing trade (9).
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
