Wednesday, 10 October 2012

Quick Technical Charts - Weakness in Catepillar - CAT

A month ago, I made a post noting that CAT was due for an oversold bounce with a potential upside of ~96 on the lower bound.  As an update, while I was right about the oversold bounce, CAT only hit ~$95 (still good for a few %) but then quickly dropped back down below into its trading channel.

As seen below, the trading channel has a lower bound of ~83 which it hit and continued to drop below today.  One day is usually not enough, many people look for 3 days below the line as a confirmation signal.  However, this clearly points out that CAT is suffering from significantly weakness in its technical.  On the brighter side, its trading channel is slightly on a rising trendline.  

Whether CAT is a wise investment right now or not will depend largely on 2 countries: China & Australia.  Infrastructure spending, growth, and commodities such as mining will play a large role in whether demand for CAT products will resurge.  For now, its a hard call to make.  Cost averaging a long term CAT position is not a bad play here but its also not the safest.

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