Monday, July 04, 2022 11:48:13 PM
Nick, here's DE on a 10-year, weekly chart. You can look at the old DE from 2013-2016 before they became a 'software' company. Then we see the stock price double and enter a steady and moderately upward trend until the pandemic. We'll get back to the post pandemic spike in a minute.
Corn is the major crop in the US. It's roughly 3X as big as wheat and soybeans combined on a bushel basis. Corn had fairly consistent minor upward movements in price from 2014 until the pandemic. Now back to DE and a chicken-egg argument.
We know that DE quickly attained a new basis about 2X higher than it's previous value based on their value as a software company and not just a great tractor company. Then after the pandemic their price doubled again but at the same time the major crop in the US also doubled. Now corn is falling quickly and DE has fallen below their weekly support line. More importantly from a technical point of view is that there is no support here. The 200 day MA may offer support at 240 but long term support is just below 200.
So back to the chicken-egg question. We know it really isn't because the price of corn has nothing to do with DE but it's very possible the price of DE has a lot to do with the price of corn because their customers are farmers and if corn and other commodities move low enough, farmers won't be new equipment even if the software is super cool. So will corn and other commodities continue to fall in price? Is there a recession as assumed by the Atlanta Fed? We can't answer these questions today but we do know there's a lot of risk.
All that said, I haven't done a fundamental analysis of DE because I'm not interested in it at this price. I would begin to pay more attention around $200.
Corn is the major crop in the US. It's roughly 3X as big as wheat and soybeans combined on a bushel basis. Corn had fairly consistent minor upward movements in price from 2014 until the pandemic. Now back to DE and a chicken-egg argument.
We know that DE quickly attained a new basis about 2X higher than it's previous value based on their value as a software company and not just a great tractor company. Then after the pandemic their price doubled again but at the same time the major crop in the US also doubled. Now corn is falling quickly and DE has fallen below their weekly support line. More importantly from a technical point of view is that there is no support here. The 200 day MA may offer support at 240 but long term support is just below 200.
So back to the chicken-egg question. We know it really isn't because the price of corn has nothing to do with DE but it's very possible the price of DE has a lot to do with the price of corn because their customers are farmers and if corn and other commodities move low enough, farmers won't be new equipment even if the software is super cool. So will corn and other commodities continue to fall in price? Is there a recession as assumed by the Atlanta Fed? We can't answer these questions today but we do know there's a lot of risk.
All that said, I haven't done a fundamental analysis of DE because I'm not interested in it at this price. I would begin to pay more attention around $200.
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