4 Trade Ideas for Caterpillar: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Caterpillar, $CAT, comes into the week pushing over short term resistance. This move comes off a touch at the 200 day SMA for the first time since November and 38.2% retracement of the last leg higher. It ended Friday over the 50 day SMA with the RSI rising through the midline and the MACD curling to cross up, but negative. There is resistance at 341.50 and 351 then 363 and 372.50 before 382. Support lower is at 335 and 330 then 325. Short interest is low at 2.2%. The stock pays a dividend with an annual yield of 1.67% and has traded ex-dividend since July 22nd.

The company is expected to report earnings next on October 29th. The August options chain shows biggest open interest at the 340 then 325 put strikes and at 330 on the call side. The September chain has open interest from 360 to 250, biggest at 290 on the put side. The call side is biggest at 330. The October chain is biggest at the 310 put and then 390 call strikes. Finally, the November chain, covering the earnings report, is big from 300 to 290 on the put side and builds from 320 to a peak at 380 on the call side.

Caterpillar, Ticker: $CAT

Trade Idea 1: Buy the stock on a move over 339 with a stop at 325.

Trade Idea 2: Buy the stock on a move over 339 and add a September 330/320 Put Spread ($3.15) while selling the October 380 Call ($3.00).

Trade Idea 3: Buy the September/October 360 Call Calendar ($4.00) while selling the October 300 Put ($3.55).

Trade Idea 4: Buy the November 310/340/360 Call Spread Risk Reversal (25 cents).

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with the first week of August in the books, sees equity markets showing resilience with a rebound from an ugly start induced by growing narrative of recessionary fears.

Elsewhere look for Gold to continue its uptrend while Crude Oil consolidates in a narrowing range. The US Dollar Index continues to drift in broad consolidation while US Treasuries consolidate in their downtrend. The Shanghai Composite looks to continue the short term trend lower while Emerging Markets consolidate under long term resistance.

The Volatility Index looks to have settled after a spike to 4 year highs removing the pressure on equity markets for now. The SPY and QQQ ETF charts continue to look strong on the longer timeframe. On the shorter timeframe both the QQQ and SPY have reset on momentum measures but also have a lot of upside work to put in before they are looking strong. The IWM is now just in consolidation mode again after a failed break higher. Use this information as you prepare for the coming week and trad’em well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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