Caterpillar has been stuck in a tight range between 80 and 90 for more than six months now. The stock made its low of the year at $79.50 in mid-April, and then quickly bounced to around the $90, which it has not seen since mid-May. Since then, the chart of CAT looks like a Sine wave, frustrating bulls and bears alike:
While CAT has been stuck for months, the volume profile indicates more aggression on the part of sellers rather than buyers. The past 4 large volume bars have all been on down days, including the most recent earnings gap lower in late October (a gap which has not come close to being filled).
Yesterday, the stock closed at a 1 month low, and on its highest volume day in almost a month. The stock is down once again today in an up tape. In addition to the technical deterioration in CAT, the fundamental backdrop has not improved. Commodity prices continue their slide – gold and silver made new multi-month lows this week, and industrial commodities like copper and aluminum are near multi-month lows as well.
We have had some success in CAT this year (one, two, three winners, and one loser). We’re just watching for now, but the stock seems to be gradually building the energy for a long-awaited, conclusive break below the $79-80 support area. CAT looks more and more like a dog with each passing day.