In this chart of AGCO, above, we can see a small double-top formation around $58 followed by a steep decline. Prices rebased in September and October around the $44-$42 area. AGCO popped back over the declining 50-day moving average yesterday. In the lower panels, we can see that the On-Balance-Volume (OBV) line is now moving sideways. In the lower panel there is a bullish divergence in September and October between the lower prices for AGCO and higher momentum readings.
In the longer-term chart, above, we can see a much bigger double-bottom pattern with the first low in the $45-$40 area in the fourth quarter of 2014. The second dip of this pattern was just made at a slightly higher low. The trend-following Moving Average Convergence Divergence oscillator is narrowing and could generate a crossover signal soon.
After yesterday's sharp rally, traders could wait and look to buy a pullback in AGCO towards $46, and then use a sell-stop below $43.
Separately, TheStreet Ratings team rates AGCO CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
We rate AGCO CORP (AGCO) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $314.00 million or 22.27% when compared to the same quarter last year. In addition, AGCO CORP has also vastly surpassed the industry average cash flow growth rate of -27.98%.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that AGCO's debt-to-equity ratio is low, the quick ratio, which is currently 0.65, displays a potential problem in covering short-term cash needs.
- AGCO, with its decline in revenue, slightly underperformed the industry average of 18.3%. Since the same quarter one year prior, revenues fell by 24.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: AGCO