Will Traders Dare to Deere?

For all the affection traders and investors have had for Caterpillar (NYSE: CAT), even as the stock closes in new, 52-week highs, is there any love left for rival Deere & Company (NYSE: DE)?

It is easy to understand why traders have been in the bag for Caterpillar. Since CAT’s last significant sell-off in mid-December, shares of Caterpillar have gained nearly 32%. Moving in an almost perfect 45 degree ascent over the course of January, CAT actually found itself in technically oversold territory above the 200-day moving average as recently as Friday. The pullback, which came as a part of a two-day sell-off, led to a two-day bounce in the stock of more than 3%.

For its part, Deere is scheduled to report quarterly earnings on Wednesday. The stock bested its summer highs in the second half of January after climbing into bull market territory at the beginning of the month, and has since begun to edge higher in a wedge-shaped, trading range.

During Deere’s rangebound trading, the stock has pulled back significantly once: dropping into oversold territory after closing lower for three out of four trading days only to finish higher for the next three days in a row, gaining more than 2%. Heading into trading on Wednesday, DE has finished higher for the past two sessions, and is trading just outside of overbought territory above the 200-day moving average.

There is no significant edge in Deere as of Tuesday’s close (less than a third of a percent), and the stock has neutral ratings of 5 out ot 10. That said, if DE continues to drift higher as it has for the past several days, there is a chance that the stock could become short-term overbought heading into earnings and begin to attract sellers, even if they are simply traders and active investors taking profits in the wake of the stock’s most recent run.

Other stocks in this space that short-term traders and active investors may want to keep an eye on include stocks like Joy Global Inc. (NYSE: JOY). Shares of JOY have closed lower for five days in a row ahead of trading on Monday and, after a brief bounce in Monday’s session, are trading lower by more than 1% heading into Wednesday’s open. JOY has a short-term, positive edge of more than 1%.

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David Penn is Editor in Chief of TradingMarkets.com