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 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.