The setup I see coming in CAT

I’ll admit it–when
looking for swing trades and options plays I have a habit of
overlooking some of the more established, “old-school” Dow companies
like
(
MCD |
Quote |
Chart |
News |
PowerRating)
,
(
IBM |
Quote |
Chart |
News |
PowerRating)
and
(
DE |
Quote |
Chart |
News |
PowerRating)
. Well after looking at some of the charts that
these companies have put together, I’m starting to think
that combines and hamburgers may not be so boring after all.

For an example of a great company with an even better looking chart,
take a look at Caterpillar, ticker symbol
(
CAT |
Quote |
Chart |
News |
PowerRating)
. Here’s the 6 month
chart:


Obviously, the stock is in a very well defined

trend channel
to the upside here. This is one of those stocks
that has led the way for Dow 11,000
and will likely continue
to do so through Dow 13,000 in 2006.


But is CAT a buy right now?

The answer is “probably not”. When you take a closer look at where
the price is in the channel, you’ll notice that it is near the top
edge. This is a signal that the stock is extremely strong but
probably overbought in the short-term. At

DaytradeTeam
, we like to look for opportunities to buy these
types of setups as the price nears the bottom of the trend channel,
preferably on low volume. In fact, we will be watching CAT very
closely over the next few weeks for opportunities to enter bullish

swing trades
or

options spreads
on the stock.

Andy Swan


Andy Swan created and
co-founded DaytradeTeam Service five years ago on a principle of empowering
individual stock and options traders with the techniques and analysis methods
typically reserved for elite professionals. His expertise in technical
analysis and commitment to educating members earned DaytradeTeam a top-ranking
among advisory services for several years.




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