After hitting its highest point this year, at 148.43, the Caterpillar stock (NYSE: CAT) started drifting lower, trading inside a short-term falling channel pattern drawn from the beginning of November. In a way, as long as the boundaries of that formation remain intact, we may continue aiming slightly lower, at least for now. But let’s not forget that, overall, the price is still balancing above its medium-term upside support line taken from the low of August 28th. From the short-term perspective, CAT could drift a bit further down, but in the end, the downside might be limited near the above-mentioned upside line, which could stall the price for a bit.
As mentioned above, if the stock’s trading activity is maintained within the boundaries of the falling channel, it may continue moving south, at least for now. CAT might end up testing the areas like 136.38, which is the low of October 31st, or even the 133.92 territory, marked by the peak of September. Slightly below that runs the aforementioned upside line, which could provide some support for the stock.
Looking at our oscillators on the daily chart, the RSI and the MACD, both suggest a possible CAT’s continuation to the downside. The RSI is below 50, but is somewhat flat right now. The MACD, although still above zero, has been drifting lower from around mid-November. Also, the indicator sits below its trigger line.
Alternatively, for us to get comfortable with the upside at this stage, we would need to wait for, not only a break of the upper bound of the falling channel, but also for a push above the 148.43 mark, which is the highest point of this year (so far). More buyers could join in, as such a move would confirm a forthcoming higher high. Only then we will consider a potential rise to the 150.49 obstacle, or even the 155.11 zone, which is the inside swing high of September 26th. The price might stall around there, or even correct a bit lower. But if the stock continues to balance above the 148.43 area, this could result in another round of buying. If this time CAT is able to bypass the 155.11 mark, this may lead to a test of the 159.36 level, marked by the highest point of October, 2018.
The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.
There are risks involved with trading of cash equities. Past performance is not indicative of future results. You should consider whether you can tolerate such losses before trading. Please read the full Risk Disclosure.
Copyright 2019 JFD Group Ltd.