4 Trade Ideas for Caterpillar: Bonus Idea

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

Caterpillar, $CAT, has been rising against trend support since shortly after the March low. Most recently it has been in consolidation at all-time highs. As it moves sideways the Bollinger Bands® have squeezed in and price has move to the top of the range. The RSI is rising back in the bullish zone with the MACD turning to cross up and positive.

There is no resistance above 182.10. Support lower comes at 176.50 and 171 then 167. Short interest is low at 1.4%. The stock pays a dividend with an annual yield of 2.26% and begins to trade ex-dividend on January 19th. The company is expected to report earnings next on January 29th.

The January options chain shows largest open interest at the 170 puts then 175 and 160. On the call side it is biggest at 170 and then from 190 to 195. The January 29 Expiry options are the first to include the earnings report. They have light open interest but show an expected move of 7.2% between now and then. This compares to the average 2.5% move for the 1 day following the report.

The February options show smooth open interest spread from 130 to 180 on the put side, but a build from 150 to a peak at 180 and then falling to 200 on the call side. The March options have the biggest open interest at the 135 puts and then it tails higher. The call side is bigger and spread from 135 to 210.

Caterpillar, Ticker: $CAT

Trade Idea 1: Buy the stock on a move over 182.25 with a stop at 177.

Trade Idea 2: Buy the stock on a move over 182.25 and add a January 29 Expiry 180/170 Put Spread ($3.40) while selling the March 200 Calls ($3.55).

Trade Idea 3: Buy the January/March 185 Call Calendar ($6.80) and sell the February 165 Puts ($3.10).

Trade Idea 4: Buy the March 165/185/200 Call Spread Risk Reversal ($1.40).

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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 books closed on 2020, saw equity markets ended on a positive foot, looking strong with more upside to come, after a wild first quarter drop. The IWM and SPY both ended the year up over 15% after being down over 30% in March. The QQQ put them to shame climbing over 47% on the year.

Elsewhere look for Gold to continue its short term move higher, pressuring the bull flag, while Crude Oil drifts to the upside. The US Dollar Index continues to move lower while US Treasuries continue their downtrend. The Shanghai Composite looks to continue the breakout to the upside while Emerging Markets slowly move higher.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY have regained their momentum while the IWM has reset momentum a bit lower, perhaps for another run to the upside. 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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