Tuesday, July 22, 2014

CAT Caterpillar Weekly Chart Rising Wedge Overbot Negative Divergence

CAT has finally run its course. Notable short-seller Jimmy Chanos of Kynikos Associates will be happy since he is short CAT and has been professing its ills for many months. He will now finally be able to breathe easy. Caterpillar can be shorted here forward. The green sideways symmetrical triangle was highlighted as it developed and played out with an upside break out as many of you long time readers remember from last year. The vertical side of the triangle is about 25 handles so from the breakout at 85, add 25, and voila, 110 target is achieved. That bull rally was basically straight up.

While the triangle pattern target is snagged, the red lines show a rising wedge in place with overbot indicators and negative divergence across the board (red lines). This is an attractive stock to short going forward. Purple lines provide support. Economists and traders say the global economy is running on all cylinders but that is in conflict with CAT rolling over for the weeks and months ahead. All construction, bridges, buildings, roads and houses begin with a hole in the ground made by a yellow excavator or dozer. Watch rubber and tire makers to see if their sales drop since there will be less need for big industrial tires for the CAT equipment. Projection is sideways to sideways lower prices into the end of the year. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 7/24/14: CAT reports disappointing earnings this morning. The stock plummets -3.4% printing an intraday low at 104.09 at that 104-105 first level of support.

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