A solid earnings beat has sparked a powerful breakout in shares of Caterpillar (CAT) - Get Report  Tuesday. The stock is up more than 4% and is the top gainer in the Dow Jones Industrial Average. This impressive move into new all-time high territory began with a huge upside gap leaving behind layers of support in the process.

Caterpillar has been trading in a fairly narrow range since early June. The stock continued to make new monthly highs following its April 25 earnings-inspired breakout, but momentum was clearly easing as the summer began. This consolidation pattern could have ended with a downside resolution last week, but the stock hung in extremely well while continuing to find support at its 50-day moving average. As last week came to a close, the stock fought back to finish above the $106.00 area, an encouraging move, to say the least.

In the near term, patient Caterpillar investors should view the stock as a low-risk buy on weakness. If the post-earnings action following Caterpillar's last powerful post-earnings move is any guide, the stock will undergo a pullback to support before a new rally leg begins.

Layers of support are in place along with well-defined downside risk. The upper band of the zone is marked by the stock's initial July high at $110.00. Just below is the June high as well as Tuesday morning's powerful breakout gap near $108.00.

On the downside a close back below $105.00 would violate the July lows, indicating trouble ahead.

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This article is commentary by an independent contributor. At the time of publication, the author was long Caterpillar.