These two stocks represent the battle between secular growth stocks that do well no matter what the economy, and cyclical stocks, which only rally when the economy is doing well. Roku was booming during the pandemic and it will do well post pandemic as well. Caterpillar has the edge right now, however, as investors are chasing those lucrative upside surprises as the economy expands.
Let's check out the charts of CAT.
In the daily bar chart of CAT, below, we can see a strong uptrend the past 12 months but the indicators are showing some subtle changes more recently. The shares are in an uptrend above the rising 50-day moving average line and above the rising 200-day moving average line. CAT is trading about $60 above the 200-day moving average line. This is not twice the level of the 200-day average but visually extended in my opinion and the widest since August.
The On-Balance-Volume (OBV) line shows a steady rise the past year but levels off the past five weeks. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been weakening the past five weeks.
In this weekly Japanese candlestick chart of CAT, below, we can see that prices have doubled from their base in the $120 area in 2018 and 2019. For an industrial company like CAT this is a logical place to anticipate some profit-taking.
The weekly OBV line is bullish and so is the MACD oscillator.
In the monthly Japanese candlestick chart of CAT, below, we get a different perspective than the weekly chart. Starting from June of 2020 we can see 10 record highs of the 8-10 record high pattern. This month of April the chart shows a doji so far and could continue to be a top reversal pattern. It's early but it bears watching.
Bottom-line strategy: Longs should consider raising stop protection to $212.