Alright, we have a lot going on here with Caterpillar from a technical standpoint. None of it looks good long term, which could also spell trouble for the DJIA if CAT continues to underperform. On the chart, you can see a longer term HnS coupled with a shorter term HnS. It did manage to hold the lows from June and earlier this month, trading well below the 10ma, and has an RSI of 27 (daily chart). If CAT can get a close above 82.58, a short term reversal could be in the works. We’re not expecting much out of it, maybe a bounce back to the 85/86 area.
Longer term, if CAT breaks below 78.25 (July 2012 lows), it could very well be heading to 72.50 or below.
I do like the two tweezer candles CAT formed on Thursday and Friday after the earnings sell off.
Trading plan: LONG with a close above 82.58.
SHORT below 78.25
Disclosure: No position