Could CAT Stock's Chart Break Down Soon?

CAT's recent earnings history has been putrid

Apr 16, 2019 at 1:31 PM
facebook X logo linkedin


Caterpillar Inc. (NYSE:CAT) has enjoyed a series of higher highs and lows since its October bottom near $112, riding technical support atop the 80-day moving average to trade at $141.70. However, new data suggests CAT stock could due for some short-term turbulence, especially with earnings set to hit next Wednesday, April 24.

Specifically, historical returns from Schaeffer's Senior Quantitative Analyst Rocky White tells us the 320-day moving average should be worrisome for those bullish on the blue-chip industrial name. You can see on the chart below how clearly this trendline has switched from support to resistance. In fact, the prior three run-ups to this moving average have produced an average one-month loss of 7.2% for the shares.

cat

Traders may also be concerned about the upcoming earnings release for CAT, considering how the last year's worth of reports have turned out. Last quarter, Caterpillar shares fell 9.1% the day after reporting, which followed one-day post-earnings losses of 7.6%, 2%, and 6.2% over the previous three quarters.

Those wanting to take the opposite view on the equity could point out the huge build-up of call open interest at the soon-to-expire April 145 call. Clearing out this overhead options open interest could make it easier for the security to make its way up the charts.

Bullish or bearish, it may not be too late to make a speculative pre-earnings bet on CAT. For instance, the options market right now isn't pricing in unusually high volatility expectations, expecting a 5.2% swing the for the day after earnings, which is right in line with the average 5.5% move from the past two years for the stock. What's more, Caterpillar's 30-day at-the-money implied volatility of 28.8% ranks in the middling 50th annual percentile. So while near-term contracts aren't attracting what could be seen as "cheap" premiums, they also aren't seeing the sharp rise in implied volatility we often see with roughly a week left before earnings.

 

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI