Caterpillar, Inc. (CAT) was mentioned during Mad Money last night. Jim Cramer said he liked Caterpillar, despite the recent analyst downgrade. He said Caterpillar is exactly the stock to own if you think a resolution to the trade war is near. OK, but let's check out the charts and indicators. It won't take long.
In the daily bar chart of CAT, below, we can see some interesting technical developments. There are a number of trends both longer-term and short-term. Prices have been making lower lows through October and higher lows from October to now. CAT is close to making a higher high if it can best the early December spike to the upside. Prices moved above the rising 50-day moving average line in January and CAT has been trading around the still declining 200-day line. Strong closes above the 200-day line will be a plus, as would a positive slope to the line.
I am not sure about the volume pattern below the price chart. Yes, there is heavy volume into the October low and light volume on the December retest -- that is positive. The On-Balance-Volume (OBV) line shows a decline to October and a retest in December, but it has yet to really turn upwards. Someone has been buying CAT, but not aggressively enough to turn this indicator.
The Moving Average Convergence Divergence (MACD) oscillator is in a bullish configuration above the zero line.
In the weekly bar chart of CAT, below, we can see a 10,000-foot view of the price action. Prices made a strong rally from $70 in 2016 to $170 by early 2018. The decline from the 2018 peak has been interrupted with rallies at times and the downtrend may have run its course. Prices are now above the bottoming 40-week moving average line.
The weekly OBV line is more than interesting. Notice how little the OBV line declined in 2018 and how it has been creeping higher from October. This time frame looks more bullish than the daily OBV line.
The weekly MACD oscillator crossed to the upside in late December for a cover-shorts buy signal. This indicator is not far below the zero line and a possible outright-buy signal.
In this Point and Figure chart of CAT, below, we can see a breakout at $142.18 and an upside price target of $171.93 being projected.
Bottom-line strategy: Fundamental analysts are a bright group of men and women, but they are not infallible and neither are technical analysts. From my humble perspective, it looks like CAT can follow the broad market higher for the next month or two. Trade it from the long side risking a decline to $125.