Fed, China Behind Caterpillar Stock Upgrade

A dovish Fed and upbeat U.S.-China trade talks are potentially positive catalysts

Dec 3, 2018 at 9:51 AM
facebook X logo linkedin

The shares of Caterpillar Inc. (NYSE:CAT) have shot up 4.6% to trade at $141.95, after BofA-Merrill Lynch upgraded the construction stock to "buy" from "neutral," and raised its price target to $163 from $140 -- a 20% premium to last Friday's close at $135.67. The analyst in coverage pointed to Fed Chair Jerome Powell's relatively dovish tone on interest rates and upbeat developments in U.S.-China trade talks as potentially positive catalysts.

It's been a rough stretch for Caterpillar stock, which was down nearly 14% year-to-date heading into today's trading. However, today's pop has the shares clearing recent resistance in the $135.75 region -- a 50% Fibonacci retracement of CAT's plunge from its Oct. 3 peak at $159.37 to its Oct. 29 annual low of $112.08.

In spite of the stock's technical troubles, bullish betting has been gaining speed in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 1.82 ranks in the 88th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Outside of the options pits, though, short sellers have been ramping up their exposure to the Dow stock, with short interest jumping 77.2% in the two most recent reporting periods to 12.07 million shares. As such, it's possible some of the recent call buying came at the hands of shorts hedging their bearish bets against any upside risk.

Whatever the reason, short-term Caterpillar options are pricing in elevated volatility expectations at the moment. CAT's 30-day at-the-money implied volatility of 35.4% ranks in the 89th percentile of its 12-month range.


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