Friday, 14 September 2012

Quick Technical Chart Summary - Caterpillar (CAT)

Meant to have this posted yesterday but didn't get the chance.  A quick chart summary of Caterpillar shows a very favorable short term bounce potential.  While CAT hit a high of $115 back in Feb, it entered a steep and steady decline due to slowing China and global growth.

With CAT being exposed heavily to construction (i.e. US Real Estate) and emerging market infrastructure spending, the drop was no surprise (though a 30% drop was a bit much).  However, with QE3 and the recently announced China infrastructure investment program, CAT saw a nice bounce.  The technicals also show a wedge formation which typical indicate a strong move incoming.  In this case, the stock has begun to move up and break out of its trading channel.

If the trend is confirmed, look for a pretty significant upside to at least in the $96-$100 range for a nice 7-9% pop.

Disclosure:  Added a small CAT long position yesterday based on this data.

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