Shares of heavy equipment maker Caterpillar (CAT) gapped lower Tuesday as traders were disappointed with the company's earnings report. Let's check the charts to see the short and longer-term potential.
In this daily bar chart of CAT, below, prices are off their intraday lows so maybe some traders have used this weakness as a buying opportunity. Prices are trading below the declining 50-day and weak 200-day moving average line.
The daily On-Balance-Volume (OBV) line shows limited improvement in July. The Moving Average Convergence Divergence (MACD) oscillator has moved up but is short of the zero line.
In this weekly Japanese candlestick chart of CAT, below, we can see some lower shadows in early July telling us that prices have reached a level where traders are rejecting their lows.
The weekly OBV line shows a decline into late June followed by limited improvement. The MACD oscillator has narrowed in recent weeks so today's chart damage may be temporary.
In this daily Point and Figure chart of CAT, below, we do not have a price gap because Point and Figure charts are not constructed like other charts. Here the chart still shows us an upside price target in the $263 area.
In this weekly Point and Figure chart of CAT, below, we can see a potential downside price target in the $101 area. Big difference from the daily chart above.
Bottom line strategy: The charts and indicators of CAT are truly mixed. Further declines are possible and strength above $200 is probably needed to refresh the uptrend. Stand aside until the picture clears.
