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The last time the technical indicators on the Caterpillar (CAT) - Get Caterpillar Inc. Report chart were similarly aligned, the stock saw a 10% move higher. A recent pattern breakout suggests another strong move is underway.

A cup and handle pattern began forming on the daily chart last month after the stock retested the 50% Fibonacci level of its 2009 low and 2014 high. Rim line resistance is positioned in the $71 area. Price action over the last week has been outside an intermediate-term downtrend line and above the declining 50-day moving average. A breakout from this pattern projects a target price back up to the 200-day moving average, and the potential move is being reinforced by a repeat of a bullish set of technical indications.

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In April this year, the stock was trading under a small horizontal resistance level and its 50-day moving average but was making a series of higher lows. The relative strength indicator was above its 21-period signal average and tracking higher, and daily moving average convergence/divergence, overlaid on a weekly histogram of the indicator, saw centerline crossovers on both timeframes. These are positive price momentum indications.

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The Aroon indicator, which focuses on time relative to price to measure momentum, was making a bullish crossover suggesting a change in trend, while accumulation/distribution was moving higher and above its 21-period signal average, and Chaikin money flow, a 21-period average of the A/D line, was in positive territory.

Those same indications are in place again, as the stock is breaking above pattern resistance. This should be viewed as a short-term opportunity because of the overall weakness in the sector, but this breakout from a well-defined pattern based off the 50% retracement level may have some longer-term significance.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stock mentioned.