Deere and Caterpillar Still Attractive

While today's broader tape is trading fairly boring for our taste we decided to spend some time looking into the industrial sector.

We are believers of longer-term emerging market growth, where housing, roads, and agricultural demand should be strong for years to come. 

As such Deere & Company (DE) and Caterpillar (CAT) both still look attractive to us here.

On the charts, both stocks have corrected about 13% in recent weeks and have come into meaningful support levels.    

In the case of Deere, the recent price correction brought it back down to its late December resistance area, which served as support in March.  Not too far below sits the 200 day moving average (red line), which also coincides with an area between a 38.2% and 50% retracement from the September 2010 to April 2011 move.  

We would like to see somewhat lower prices still in both DE and CAT and as such are opting for a put selling strategy to gain initial exposure to those names.  One could of course also enter an initial long position via the stock directly and give it a longer stop-loss level, being aware that a summer correction in stocks could bring about somewhat lower levels for both stocks.

Happy Trading


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