Caterpillar Inc. (CAT) is a member of the group of 30 or what is commonly called the Dow Jones Industrial Average (DJIA). From the opening bell this Tuesday it has been leading on the downside. With the DJIA down short of 3% earlier this afternoon a closer look at CAT seems in order.
In the daily bar chart of CAT, below, we can see that prices have been trading low since January in wide-channel-like pattern. Prices saw a more exaggerated down-move in October and a reflex-like rally in November. Prices briefly broke above the declining 50-day moving average line and nearly touched the underside of the bearish 200-day average line yesterday.
The trading volume was very heavy into the October low and has moderated from there. The daily On-Balance-Volume (OBV) line has been improving from the October low signaling more aggressive buying.
The Moving Average Convergence Divergence (MACD) oscillator turned up in early November for a cover shorts buy signal and is just about ready to cross the zero line for an outright go long signal. That could be delayed now.
In this weekly bar chart of CAT, below, we can see the rally to the underside of the declining 40-week moving average line. The weekly OBV line shows a peak back in January and some recent improvement from October. The weekly MACD oscillator is poised to cross to the upside for a cover shorts buy signal.
In this Point and Figure chart of CAT, below, we can see a rapid rally (X's) and a decline (O's). There appears to be support below the market but one never knows whether it will hold or not until it holds.
Bottom-line strategy: The $130-$122 area looks like it can act as support for CAT. If CAT trades more than 50% through this anticipated support area it will be bearish, in my opinion. If CAT holds in the top end of support then I would take it as a sign of strength.