Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

4 Trade Ideas For Caterpillar: Bonus Idea

Published 05/21/2018, 07:40 AM
Updated 05/14/2017, 06:45 AM

Here is your Bonus Idea with links to the full Top Ten:

Caterpillar (NYSE:CAT), started moving higher in April last year. It had several pauses along the way to a top in January. It pulled back to the 100 day SMA at first, and bounced, creating a support area to consolidate over. This was also a 38.2% retracement of the move higher. The 200 day SMA came up to touch price in May and it has risen ever since. A stall and shallow pullback at the 100 day SMA saw a quick reversal and now price is back at that interim top.

The RSI is into the bullish zone and moving higher while the MACD is rising and positive, both giving rise to the idea that a reversal out of consolidation is underway. There is resistance at 157.20 and 160 followed by 164.50 and 169 then 173.25. Support lower comes at 152 and 145 followed by 139.50. Short interest is low at 1.6% and the company is expected to report earnings next on July 30th.

The June options chain shows the largest open interest at the 145 strike on the put side, while it is biggest at the 160 strike on the call side. The July chain shows open interest building from 125 up to 160 on the put side and much tighter, from 150 to 160 on the call side. The August chain, the first capturing the next earnings report, shows a flat curve from 120 to 160, biggest at 145, on the put side. The August calls show equal open interest from 150 to 175. The at-the-money straddle in August suggests traders pricing in a $15.50 move in the stock price by then.

Caterpillar, Ticker: $CAT

Caterpillar Daily Chart

Trade Idea 1: Buy the stock on a move over 158 with a stop at 154.

Trade Idea 2: Buy the stock on a move over 158 and add a June 155/150 Put Spread ($1.80) for protection, selling a July 170 Call ($1.21) to fund most of the protection.

Trade Idea 3: Buy the June 1 Expiry/August 160 Call Calendar ($4.75). As the June 1 Expiry Calls expire, look to sell additional weekly or monthly calls against the August position.

Trade Idea 4: Buy the July 140/160/170 Call Spread Risk Reversal ($1.55).

After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with May options expiration behind and the last full trading week before Memorial Day kicks off the summer season ahead, equity markets are mixed.

Elsewhere look for Gold to continue its move lower while Crude Oil continues in an uptrend. The US Dollar Index also looks to continue to move higher while US Treasuries trend lower. The Shanghai Composite looks to continue to bounce off of support and Emerging Markets remain in consolidation building there bull flag.

Volatility looks to remain at very low levels keeping the bias higher for the equity index ETF’s SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts are mixed though. All look strong on the weekly timeframe. And the IWM is leading to the upside making new all-time highs. The SPY and QQQ are in consolidation short term though with the QQQ looking the weaker of the two. Use this information as you prepare for the coming week and trad’em well.

DISCLAIMER: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.