4 Trade Ideas for Caterpillar: Bonus Idea

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

Caterpillar, $CAT, had a strong trend move higher off the pandemic low. It paused at the full retracement and then moved higher, only to pullback in October to retest that breakout. It paused again at a 150% extension of the retracement and then after a retest, continued higher again. Another pullback found support at the 200% extension and then it moved higher again. It met resistance at the 238.2% extension and held for over a month until continuing to the current resistance at the 250% extension.

The RSI is rising in the bullish zone with the MACD moving higher and positive. There is no resistance above 244.50. Support lower comes at 237 and 225.50 then 218. Short interest is low at 1.1%. The stock pays a dividend with an annual yield of 1.70% and has been trading ex-dividend since April 23rd. The company is expected to report earnings next on July 29th. The May options chain shows biggest open interest at the 230 and 220 strikes on the put side, and although it is big at those same strikes on the call side it is bigger above at 240, 245 and 250.

In the June options open interest is focused from 200 to 240 biggest at 220 on the put side and biggest at 230 tailing higher on the call side. July options see open interest focused at 230 and 210 on the put side but bigger at 260 on the call side. Finally, the August opens, the first to cover the next earnings report, are building with biggest open interest at the 230 and 220 put strikes. August calls are biggest at 230 the 240 and 250.

Caterpillar, Ticker: $CAT

Trade Idea 1: Buy the stock on a move over 245 with a stop at 236.

Trade Idea 2: Buy the stock on a move over 245 and add a June 240/230 Put Spread ($3.50) while selling the July 270 Calls ($2.30).

Trade Idea 3: Buy the June/August 260 Call Calendar ($5.15) and sell the July 230 Puts ($5.60).

Trade Idea 4: Buy the August 220/250/270 Call Spread Risk Reversal (20 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 heading into May options expiration week, sees equities markets have become mixed.

Elsewhere look for Gold to continue its move higher while Crude Oil consolidates in a tight range. The US Dollar Index resumes its move to the downside while US Treasuries consolidate in their pullback. The Shanghai Composite looks to continue to mark time moving sideways while Emerging Markets consolidate just under the February highs.

The Volatility Index looks to remain low after a spike making the path easier again for equity markets to the upside. Their charts also look good on the longer timeframe, with the SPY showing real strength over the IWM and QQQ in consolidation. On the shorter timeframe both the QQQ and SPY held at higher lows and reversed showing some strength while the IWM continues in the 4 month churn. 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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