We reviewed Caterpillar Inc. (CAT) the other day, where I wrote that "With no nearby chart support CAT could sink rapidly to the $100 area in the next few weeks." CAT was hit with heavy volume (selling) Tuesday and our charts now suggest that $100 may be a waypoint in this decline. Let's see what has changed.
In the daily bar chart of CAT, below, we can see an alignment of bearish signals. CAT is below the declining 50-day moving average line and the bearish 200-day line. The daily On-Balance-Volume (OBV) line has made a new low for the move down, telling us that sellers are aggressive with heavier volume being transacted on down days.
The Moving Average Convergence Divergence (MACD) oscillator continues to move down in sell territory below the zero line.
In this weekly bar chart of CAT, below, we can see that the bear is in control -- prices are below the declining 40-week moving average line. The weekly OBV line is pointed down and the MACD oscillator is in an outright sell configuration.
In this updated Point and Figure chart of CAT, below, we can see a new downside price target of $75.44 being projected.
Bottom-line strategy: CAT could make an oversold bounce but we have downside price targets of $100 and now $75.