Caterpillar Inc. (CAT) has been in a longer-term downtrend but the charts have improved enough to ask the question whether CAT is staging a major upside reversal.
Let's check out the charts.
In the daily bar chart of CAT, below, we can see how prices declined from January to the middle of March. The stock retraced about two-thirds of the decline and then fell back again in what I would consider a retest of the March low. Prices have rallied from the middle of May and are now close to breaking above the April high of $130 to give us an uptrend -- higher highs and higher lows. CAT is close to closing above the flat/bottoming 200-day moving average line. The quicker-to-react 50-day moving average line has turned positive.
The daily On-Balance-Volume (OBV) line has been positive since late March and tells us that buyers have shifted to a more bullish stance. The Moving Average Convergence Divergence (MACD) oscillator has turned bullish with its recent move above the zero line.
Bottom-line strategy: Forward-looking investors could go long CAT at current levels risking a close below $110.
Strength above $128.71 is a good signal and a weekly close above $150 gives us a longer-term buy signal. Our weekly Point and Figure chart price target is $178.