DataTrader: Can Caterpillar Keep Climbing?
Shares of Caterpillar (CAT) belong to that group of industrial stocks mentioned in a recent DataTrader column on the exchange-traded fund (ETF) representing the sector (see DataTrader: Have the Industrials Become a Crowded Investment?
And while it is hard to tell whether or not Caterpillar’s bear market days are over for good, it is increasingly likely that the stock will see at least some selling in the near term.
CAT had closed higher for six out of the past seven days in heading into trading on Thursday, and was little changed ahead of trading on Friday. Sideways trading in the stock has helped moderate short-term overbought conditions. But CAT is still trading very much near short-term highs just a few days after falling to its lowest levels of the year. And the statistics tell us that short term rallies that take stocks into overbought territory inevitably attract enough sellers to send those stocks lower, often low enough for traders to want to avoid these stocks ahead of time – or to consider selling them short.
It’s also worth noting that Caterpillar is among the lowest rated stocks in our database of Dow stocks. Caterpillar last earned these low ratings in late August, shortly before plunging by more than 6% over the next two days.
Quantified data and research on stocks like Caterpillar is available each evening after the market close. To learn more, click here.
David Penn is Editor in Chief of TradingMarkets.com