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Considering CNH Global Investors

08/04/10 08:10:29 AM
by Koos van der Merwe

Is Amsterdam-based CNH Global Investors worth a look?

Security:   CNH
Position:   Accumulate

What is CNH Global Investors? CNH Global Investors consists of its agricultural equipment segment, which manufactures tractors, combine harvesters, and other farming equipment; its construction equipment segment, which manufactures crawler excavators, graders, haul trucks, backhoe loaders, and more; and its financial services segment, which offers financing for the purchase or lease of company products. Why should we care? With the recoveries in the European market and the recovery in world economies starting to show themselves, this stock looks interesting.

Graphic provided by: AdvancedGET.
Figure 1, which is a weekly chart, shows how the price dropped from January 2008 to March 2009, a fall from $70 to $5. The price rose to $33.24 from March 2009 to April 2010 in what my Elliott wave count suggests could have been a Wave I of a new bull market. The problem, however, is the Wave II retracement. Is this correction complete with the start of Wave III and another bull market, or does it have another leg down? The relative strength index (RSI) is still falling but volume rose as the weekly price rose. To answer these questions, I turned to the daily chart.

Graphic provided by: AdvancedGET.
The daily chart seen in Figure 2 shows a wave count that very much suggests that a Wave 1 of Wave III is on the cards, but that a Wave 2 of Wave III could very well be in the process with a target of $29.50, the 25% retracement level holding. Unfortunately, the RSI has given a sell signal, even though volume rose as price rose, a bullish sign. The RSI is therefore suggesting a test of $28.02 (38.2% retracement), with the 50% retracement at $26.79 being the most likely level because of past consolidation at this level, with the gap just below it at $26.12; prices do fall to fill the gap.

CNH Global should be placed on your watchlist, and considered for purchase when the RSI is at or close to the 32 level.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address:

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