NEW YORK (TheStreet) -- Caterpillar (CAT) - Get Report and 3-M (MMM) - Get Report third quarter earnings will have been dragged down by the strong dollar and weakening global economic growth. Investors should establish strategies to sell these stocks after they report results before the opening bell on Thursday.
This risk was clearly reflected in the disappointing earningsCoca Cola (KO) - Get Report reported before the opening bell on Tuesday. Coke's global sales were hurt by slowing consumer spending and the strong dollar.
Industrial products giant Caterpillar depends upon overseas markets for more than half its sales of construction and mining equipment, engines and gas turbines. The company beat earnings estimates in the first quarter and the stock continued higher to a multiyear intraday high at $111.46 on July 16 anticipating solid second quarter results. Despite beating analysts estimates the stock gapped below its 50-day simple moving average on July 24 due to a revenue dip from lower mining demand.
Caterpillar traded as low as $99.11 on Aug. 1, then followed the Dow 30 higher. After trading as high as $109.73 on Sept. 2, the stock cascaded lower and broke below its 200-day SMA on Sept. 25 to as low as $90.05 on Oct. 15.
3-M is a multi-sector conglomerate with worldwide sales of industrial and consumer products exposing the company to the strong dollar and slowing global growth. The company matched earnings estimates in the first and second quarters and joined the Dow 30 in setting an all-time intraday high at $147.87 on Sept. 19. The decline to its Oct.15 low at $130.60 was a decline of 11.7%, in correction territory.
Let's look at the daily chart for Caterpillar.
Courtesy of MetaStock Xenith
The daily chart for Caterpillar shows the stock well below its 50-day (blue line) and 200-day (green line) simple moving averages at $102.24 and $101.52, respectively. This chart is important for the overall Dow 30 given a potential "death cross" for Caterpillar, where the 50-day breaks below the 200-day SMA.
Here's the weekly chart for Caterpillar.
Courtesy of MetaStock Xenith
Caterpillar has been tracking the 200-week SMA (green line) since January 2010. The stock set its all-time intraday high at $116.95 in February 2012 and is back around its 200-week SMA, now at $94.49. The weekly chart is negative with declining momentum and key weekly moving average at $99.16.
Here's how to trade the post-earnings volatility for Caterpillar and 3-M Company.
Caterpillar ($95.89): Investors trading the ranges should consider buying weakness to the Oct. 15 low at $90.05. Investors looking to sell strength should do so at the convergence of the 50-day and 200-day SMAs at $102.24 and $101.52.
3-M ($140.93): Investors trading the ranges should consider buying weakness to the Oct. 15 low at $130.60. Investors looking to sell this stock should consider doing so if strength fails at the 50-day SMA at $142.04 or the stock fails to hold its 200-day SMA at $138.99.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates CATERPILLAR INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate CATERPILLAR INC (CAT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
You can view the full analysis from the report here: CAT Ratings Report