Caterpillar Inc. (CAT) was favored by Jim Cramer on last night's Lightning Round of his "Mad Money" program on CNBC. Jim said, "It yields 2.6% and I think they're going to do fine. I like Caterpillar." Let's review the charts as CAT has been in a downtrend for a while.
In this daily bar chart of CAT, below, we can see a pattern of lower highs and lower lows until this past December. CAT did not fall to break the late October low and the trend of CAT has shifted from down to sideways. Prices have been above the rising 50-day moving average line all month and the 200-day line intersects just below $140 now.
The daily On-Balance-Volume (OBV) line shows stability the past three months and that is a plus in my opinion.
The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but could turn up or down from here depending on the price action ahead.
In this weekly bar chart of CAT, below, we can see that prices are below the declining 40-week moving average line. A weekly close above $140 would break the downtrend.
The weekly OBV line shows a very positive picture as it only declined slightly from early 2018 and is now just slightly away from a new high.
The weekly MACD oscillator just crossed to the upside for a cover shorts buy signal.
In this Point and Figure chart of CAT, below, we can see a nearby price target of $148.
Bottom line strategy: CAT has been "out of favor" for a while but it looks like that is in the rear view mirror. Aggressive traders could probe the long side of CAT here and above $140. Risk a close below $123 looking for gains to the $148-$155 area.