Caterpillar CAT Shatters Support: Updating New Trading Levels

Jan 27, 2015: 12:04 PM CST

Caterpillar (CAT) shares shattered support at the $85.00 per share level on an earnings miss this morning.

Wall Street consensus estimated a gain of $1.55 per share yet the actual reported earnings were $1.35 per share.

Traders subsequently punished the stock with a downside gap and break of a trendline and key support level.

Here’s the Daily Chart, though the Weekly Chart will give a broader perspective with targets:

Shares initially bounced (rallied) up off the $85.00 per share rising trendline level, only to see this morning’s earnings gap collapse price straight toward the $80.00 per share level.

Let’s actually turn our attention – and planning – to the Weekly Chart where we can see the broader picture:

I drew a simple Fibonacci Retracement grid from the 2009 low near $21.70 per share all the way to the $110.60 high into 2012.

Price has traded between the 38.2% Retracement and the high ever since this high.

Notice the key support – highlighted – of the 38.20% level into $80.00 per share.

That’s our major focal point here – shares are bearish as a downside (sell) pathway opens under $80.00.

A simple sell-swing could take price back toward the midpoint or $70.00 per share confluence (target).

Otherwise, be on guard for a vicious Bear Trap which could trigger on an instant return above $80.00.

We’re often charting – and thus trading – price as it moves toward or away from a key level.

For Caterpillar (CAT) shares, this level is simply $80.00 per share.

The next few swing or short-term trades should take place within this context – a movement (trap) up away from $80 or else a breakdown/shatter sell signal under $80.

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Corey Rosenbloom, CMT
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2 Comments

2 Responses to “Caterpillar CAT Shatters Support: Updating New Trading Levels”

  1. Bailey Says:

    Support levels are always vital and can be highly profitable if used properly but at the same time we must be very careful that we have a stop loss because crossing it means it’s into a trend and we don’t want to be on that side. I mostly depend on my broker OctaFX as they have brilliant analysis service that is provided by highly qualified team of experts so they almost are invincible but still I also have money management in place in every trade.

  2. Pandya Says:

    This can be a really good trade to go at but we should make sure we don’t do anything silly or it can be seriously risky. I am trading with OctaFX broker and with them, I get great analysis update daily while I can even see what top traders are doing through the platform available on their web site, it makes trading easier but of course I focus on currency pairs mainly instead of stock since that way I don’t have to invest too much and still gain quite a lot.