DE, John Deere

Nothing runs like this, both up and down;

de oct 7 2011 de oct 7 s 2011

The faster things go up, the faster they come down. DE is one of the few stocks that has a fairly clear count;  a single top that makes sense, then a first 5-down and a-b-c retracement of about 50% for a wave 2, and then 5-down with a nice gap for wave 1 of 3. A little higher for wave 2 of 3 and then the real action starts as we go into 3 of 3. The first target is around $47 and then on to new lows. . The alternate, unfortunately there is still an alternate, however with very low probability, is that all of this is wave 1 and we are presently in the process of doing 2 with quite a bit still to go. The stock was down roughly 42%.

How can this be possible? Move to the country and you will learn that just about every farmer nowadays owns two or three of these machines. They cost roughly anywhere between $25k and $150k , depending on horsepower etc. With loaders, gps, air-conditioning the price can go higher. These things, mostly diesels, last a life-time with a little proper care. Ergo, there is hardly ever a true need to buy a new one. When they are bought it is invariable as a want,  not a need. Farmers love their toys just as stock-brokers love their BMWs, the difference is that the BMW depreciates fast, the tractor does not. This is consequently a very discretionary purchase and demand can literally collapse for years. DE has gone through one of these cycles in the past.