Bull Note Keeps Caterpillar Stock Hot

Receding trade fears has been a boost to Caterpillar

Sep 20, 2018 at 10:10 AM
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Caterpillar Inc. (NYSE:CAT) has found a resurgence on the charts thanks to dwindling trade war fears. Since the start of last week, the stock has had just two negative days, and it had already added more than 10% in September coming into today. In fact, CAT shares yesterday grabbed their highest close since mid-June, also marking their first settlement above the 200-day moving average since that time. Now they're gaining again today thanks to a bullish analyst note.

Brokerage firm Baird jumped in with an upgrade to "outperform" from "neutral," saying there's still strong demand in the heavy machinery sector. It also added that the stock's recent weakness was due to trade concerns, which appear to be fully priced in now. Overall, there's a slim bullish tilt from the analyst community, with 11 of the 20 covering CAT saying it's a "buy" or "strong buy."

In the options pits, trading activity has turned more bullish from the heavy put activity we noted early this month. The equity's 10-day call/put volume ratio International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has swelled to 1.61, showing a clear preference for long calls over puts. What's more, this ratio ranks in the 74th annual percentile, showing that such a call-skew is rare.

Looking at some of the largest increases in open interest during this two-week period, the October 160 call stands out. This soon-to-be front-month contract has seen mostly buy-to-open activity, so many have been speculating on Caterpillar shares rising above $160 over the next month.


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