Caterpillar Is Oversold

Caterpillar was one of the favorite value / cyclical plays coming out of 2020’s mini-depression. Now, the Dow Jones Industrial Average member just had its biggest pullback in a long time.

This chart highlights the deeply oversold condition on stochastics, which fell on Monday to their lowest level in over a year. CAT also just had its worst week (-9.6%) since the depths of the coronavirus crash in March 2020:


The main catalyst for the selloff appears to be the failure of a high-dollar bipartisan infrastructure bill in Congress. However, there were signs of trouble on the chart – especially the bearish divergence on MACD.

However now that a liquidation has occurred, bulls may like the chart. Aside from the oversold stochastics, CAT is holding the March 2021 low around $216. Will this level become support again?

Given the sharpness of the drop and the high volume, it may still be early in the process to jump into CAT. However, it remains one of the most important cyclicals / industrials in the market. Potential buyers may start getting interested – especially with a new quarter getting close.

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