Has CAT Run out of Lives?
Caterpillar has been leading a rally in industrial stocks, but now some traders may expect a pullback.
Notice the gap to new record levels on August 1 after earnings beat estimates. CAT pushed to another high the following session but failed to hold and closed in the red. That kind of “shooting star” candlestick is a potential reversal pattern.
Second, the surge pushed Wilder’s Relative Strength Index (RSI) far into overbought territory. It’s now retreating from that condition.
Third, a narrowing price range since the rally produced a triangle. Prices broke the bottom of that formation yesterday. They also closed below their 8-day exponential moving average (EMA) for the first time this month.
Traders looking to the downside may target the $270 area or lower, which corresponds to the recent gap.
The macro backdrop could also worry some investors, given China’s economic weakness lately.
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Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
Notice the gap to new record levels on August 1 after earnings beat estimates. CAT pushed to another high the following session but failed to hold and closed in the red. That kind of “shooting star” candlestick is a potential reversal pattern.
Second, the surge pushed Wilder’s Relative Strength Index (RSI) far into overbought territory. It’s now retreating from that condition.
Third, a narrowing price range since the rally produced a triangle. Prices broke the bottom of that formation yesterday. They also closed below their 8-day exponential moving average (EMA) for the first time this month.
Traders looking to the downside may target the $270 area or lower, which corresponds to the recent gap.
The macro backdrop could also worry some investors, given China’s economic weakness lately.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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