Sometimes I lose perspective in Cleveland, that Ohio is really just one big farm. From what I see mostly corn and soybeans, but also hay. You don’t see it 10 miles from downtown where I am but give it just another 10 miles and boom. This is agriculture country.
I’m told most of the planting is done now, so it is maintenance mode until the harvest. but with the mood turning to the harvest it is the perfect time to check on the equipment. Turns out it is not such a bad time to check out the farm equipment stock either.
The chart of AGCO Corporation (NYSE:AGCO) an agricultural equipment manufacturer, above has been looking good since breaking out of a channel in February. The initial move higher retested the prior high, from December, before moving back up to the current consolidation range between 50.80 and 52.10.
It has been on my radar since the consolidation started but now there is a heightened sense of urgency. Over the last two weeks it has retested the 20-day SMA and riding that higher. And now the Bollinger Bands® are squeezing. It is time to move.
The Measured Move suggests a $3 move when it breaks out, either up or down. The momentum indicators are bullish, with the RSI holding near 60 and the MACD flat. But both could be weakening. The June options open interest is largest at the 50 Strike. This could hold it near the current price despite the volatility indicator suggesting otherwise.
With a mixed read there seem to be two ways to prepare. First, just wait for a break of the range and trade it whichever way that is. The second would be to believe the current trend higher and buy the stock with a collar for protection. The June 50/July 55 Collar costs lest than 0.50% of the stock price. This gives you protection below 50 for over 3 weeks and retains 7% upside.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.