Caterpillar Stuck In The Mud, But Will Earnings Provide Some Traction?

Caterpillar monthly chartCaterpillar is a stock I have posted on over the years, and in particular ahead of the the US election when I suggested it would be one to benefit from a Trump win, which was indeed the case, with the stock duly rising from $90 per share to ultimately top out at $173.24 per share last year on a large upthrust candle on high volume (classic volume price analysis).

Since then it has weakened and moved into an extended congestion phase on the monthly chart as the price action continues to trade within the spread of the dramatic volatility candle of October last year. Last month’s price action completed a two bar reversal with a well defined platform of support now in place at $112 per share. Above, the ceiling of resistance at $144 per share and denoted with the red dashed line of the accumulation and distribution indicator is now in play having capped the advance of earlier in the year. Therefore, for an extended rally to develop this level needs to be breached with good volume, as does the secondary level at $158 per share which would then open the way to the stock regaining the $170 per share level in the longer term. And with earnings due on the 24th July with a forecast EPS of $3.12 this could provide the catalyst for a move away from the current congestion phase.

A further factor to consider is Caterpillar’s status as a bellwether for the global economy making it particularly sensitive to the current Sin0-US trade tariff talks which to date appear to be drifting and perhaps reflect the present consolidation phase of price action for this stock.