The American agricultural equipment manufacturer headquartered in Duluth, Georgia, AGCO Corporation (NYSE: AGCO) shows signs of an upcoming price surge according to its latest charts.

Bullish Indications

#1 Channel: The daily chart of AGCO shows that the stock has been trading within a channel during the past several weeks. This channel is marked in pink color lines. Once the stock breaks out of this channel, it has the potential to move further up.

#2 IH&S Breakout: As you can see from the daily chart, the stock has currently broken out of an Inverted Head and Shoulders (IH&S) pattern. This IH&S pattern is marked in the chart in orange color. An IH&S pattern is a strong bullish pattern and a breakout from this pattern indicates that the stock may move higher in the short term.

#3 Trading Above MAs: The stock is currently trading above its 50-day as well as 200-day moving averages, indicating a bullish bias for the stock.

#4 Bullish CCI: The CCI indicator value is currently moving up. This indicates possible bullishness.

#5 Bullish Stochastic: The %K line of the stochastic is above the %D line.

This indicates a possible bullish bias.

#6 Broken Downtrend: The weekly chart shows that the stock has currently broken out of a short-term downtrend (marked as a pink color line).

This is a possible bullish sign.

#7 MACD above Signal Line: In the weekly chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered as a potential buy signal.

#8 Fibonacci Level Support: Usually, after an up-move, stocks retraces to any of the key Fibonacci levels before surging back again. AGCO had taken support at the 23.6% Fibonacci support level of the upmove, as seen from the weekly chart. This looks like a good area for bounce-back.

Recommended Trade (based on the charts)

Buy Price: If you want to get in on this trade, you can purchase shares of AGCO in two scenarios

  • If the stock breaks out of the channel and closes above $66.50.
  • If the stock corrects to the support level of around $62.

TP: Our target prices are $75 and $80 in the next 3 to 6 months.

SL: To limit risk, place a stop loss below $60.20 (for entry near $62) and $64.00 (for entry near $66.50). Note that this stop loss is on a closing basis.

Our target potential upside is almost 13% to 29% in the next 3-6 months.

  • Entry near $62.00: For a risk of $1.80, our first target reward is $13.00 and the second target reward is $18.00. This is a 1:7 and 1:10 risk-reward trade.
  • Entry near $66.50: For a risk of $2.50, our first target reward is $8.50 and the second target reward is $13.50. This is a 1:3 and 1:5 risk-reward trade.

In other words, this trade offers nearly 3x to 10x more potential upside than downside.

Risks to Consider

The stock may reverse its overall trend if it breaks down with high volume from the Inverted Head and Shoulders pattern breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.

Happy Trading!