Deere just succumbed to the bears, and there could be more pain ahead, experts warn
The bears are after Deere DE .
Shares of the equipment manufacturer were clobbered in Friday's trading session, falling nearly 8% after Deere blamed rising U.S.-China trade tensions for its downbeat earnings and full-year forecast. That puts the stock at more than 20% below the 52-week high it reached in April.
Market watchers are growing increasingly worried about Deere's ability to withstand a prolonged trade war, a concern J.P. Morgan analysts emphasized earlier last week in a note downgrading Deere and highlighting the "perfect storm" facing the U.S. agriculture industry.
"The shares have been absolutely plowed year to date," Craig Johnson, managing director and senior technical research analyst at Piper Jaffray, said Friday on CNBC's "Trading Nation." "It looks like ... the next area of support comes in around $128, so about another 7% lower than we are from these current levels."
It continued to move lower Monday, down 0.5% in premarket trading to $134.07. Deere ended trading on Friday down nearly 8%, putting its year-to-date losses at nearly 10%.
If the stock falls to the $128 level, Johnson said he'd "look for a little bit of a relief rally at that point" as the stock bounces off that support level.
But, he warned, "I suspect that [rally will] probably be sold, and then you really are going to have to watch that $128 level, so I would not get a stepup here in front of Deere at this point in time."
Boris Schlossberg, managing director of FX strategy at BK Asset Management and co-founder of BKForex.com , agrees with Johnson but likes some of Deere's fundamental strategies.
"I still think there's quite a lot of downside left simply because we just don't know how the China story plays out," Schlossberg said in the same "Trading Nation" interview.
He said that if he were trading the stock, he would likely sell put options — a bearish trade that anticipates the stock going lower — at the $110 or $115 level.
But "from an investment point of view, Deere does have a tremendous franchise in agriculture," Schlossberg said. "One of the things that they're doing right now that's interesting is they're trying to go into a subscription model where they're going to be selling a lot of their data to help farmers actually increase their yields."
If that push into the subscription business works out for Deere, "that's very bullish long term" as the company will stop relying as heavily on selling physical products, Schlossberg said.
"But for right now, there's just too much negativity in the stock to really want to step up and want to buy it here," he said. "I'd much rather be selling puts and get myself into a much better price position down the road."
More From CNBC
