Will Deere & Company (DE) Continue its Bearish Earnings Trend?

Deere & Company (DE) is a manufacturer of heavy machinery and vehicles for a range of agricultural and construction applications. The company’s stock is currently trading around $87.50 in a 52 week range of $78.88-$94.89. The stock has been underperforming the market this year having sold off 4.31% year to date. Technically, the stock is trading in bullish territory, above the Ichimoku cloud, but the stock is set to report earnings before the bell tomorrow.

DE has been very weak on earnings over the past 8 quarters. The stock has sold off on earnings day 7 of the past 8 quarters with an average move of 2.6%. Currently the options market is implying a move of around $2.30 by Friday’s close which prices in a move of around 2.63%, right in line with the historical average. Despite the strength DE may be showing technically the stock does appear to be relatively weak in today’s session. With a dismal historical performance record it is difficult to justify anything but a short in DE ahead of earnings. Using the move being implied by the options market I am looking to get short DE with a downside target of around $85.20.

Trade: Buying the DE Nov 28th Weekly 86-85 Put Spreads for $0.23
Risk: $23 per 1 lot
Reward: $77 per 1 lot
Breakeven: $85.77