A turn in CAT?

Are we finally seeing a turn in Caterpillar shares?  Let’s take a look.

After a panic gap down in late September, the stock formed an island bottom on heavy volume over the next week.  Since then, the new floor has been 67.50.  We can now say this has gone from a bearish to neutral market.

Looking at long term chart, we see that 62.5 level is the bottom of a four year range last seen during the 2011 panic.  The strong reaction at that level is a positive.  Technically, above that island gap, we can look for a push higher within the range.  Also note the potential head and shoulders bottom pattern developing.

Moving to the fundamentals and psychology, CAT posted dire sales numbers earlier this week.  

What really stands out is 1) the stock held the new floor level around 67-68 and 2) Analysts are piling on with their negativity.  

This is in no attempt an attack at any analysts or publishers, just an attempt to share interesting pieces of evidence.  

Business Insider called CAT’s sales chart ‘the ugliest chart in the world’

Barron’s also noted some strong analyst reaction.  

No offense to Gordon, but using all caps and exclamation points suggest emotion in one’s opinion.  Also, let’s remember that CAT is trading at 70.  They’re expecting a 60% decline next year.  That is aggressive.  

So again, we have strong opinions with emotion.  Also, the stock is holding a new higher support.  Frankly, this combination reminds me of nearly every time I sold at or near a bottom.

Will that be the case this time?  Time will tell, but it’s an interesting combination.

Thanks for reading!