Caterpillar Inc

This bellwether is losing altitude after struggling for a year to stay aloft. With the world slipping into synchronous recession, it's a wonder CAT has held up as well as it did.  From a technical standpoint, the series of three successively higher points 'C' makes the 68.18 correction target less than reliable; however, it'll have to do for predicting the extent of the next tumble, since it's all we've got.  More immediately, there appears to be a struggle at the 83.94 midpoint support, perhaps imagined, but we should infer that the next down-leg is imminent if the stock closes below that number for two consecutive weeks.

We've had our eye on a correction target at 84.16 that's been six weeks in coming, but yesterday's swoon-induced low at 84.45 wasn't quite close enough to get us aboard via the straight bid I'd advised at 84.21.  Nor would camouflage have sufficed, since even on the one-minute chart, the trampoline bounce off the low was too steep and violent to create any handholds. Shorts will have been scared to half to death, and so we shouldn't look for the stock to return to our target level any time soon.  In any case, we'll bide our time and perhaps try to get long, even if at a higher price, when the stock quiets down.

We've looked at CAT for bellwether clues but have never traded it. Let's try something new, bottom-fishing near an 84.16 correction target (see inset) that looks quite compelling. Officially we'll use camouflage, and I'll try to signal the entry opportunity in the chat room if I'm at my desk when the screen alert I've set goes off.  However, if you'd rather dispense with the fancy stuff, you can use a straight bid for 400 share @84.21, stop  84.03.  If you want to be notified via e-mail in real time of a 'buy' signal, be sure to check 'E-Mail Notifications' on your My Account page. _______ UPDATE (March 31, 11:13 p.m. EDT):  To finish the week, the usual bunch of ripoff artists opened CAT on a gap (see inset, a new chart) that turned out to have been a bull trap.  The stock is still a buy, but camouflageurs will need to be especially careful, since buyers are likely to be smarting for a day or two as a result of having been whipsawed for an entire week.

Caterpillar is correcting an impressive impulse leg and bids fair to hit par on the next run-up.  My hunch is that the spectacular gap created on the first trading day of the new year needs some backing and filling before the stock is ready to embark on a robust C-D leg. If the pattern shown, or a further evolution of it, trips an entry signal, be ready to jump on it via a chart of 15-minute degree or less. _____ UPDATE (11:01 p.m. EST):  The stock looks a little too strong at the moment to bless us with an easy camo trade.  That could imply entering at the point 'x' shown in the new chart, but it would have been too risky to have done so in the final hour yesterday. My hunch is that the entry trigger will be left in the dust by a gap-up opening Wednesday morning; or, if stocks are weak, rendered moot by a dip below the existing point C. Whatever happens, I'll leave it up to you to improvise an entry strategy on-the-fly. If you're interested, please don't hesitate to query me about this when I'm in the chat room. _____ UPDATE (January 22 at 12:51 a.m. EST): Friday's goosing put this runaway freight train on course for a run-up to 102.69 (daily chart, A=86.55 on 12/27 at 4 p.m. EST; B=95.67).  The midpoint sibling lies just above, at 98.13. Camouflageurs should use May 10's external peak at 97.39 to set up an entry trigger. Beware of a fleeting B-C pullback, since the rally looks strong enough to pull a hundred bulls with it.  _______ UPDATE (February 5, 12:58 a.m. EST):  Friday's gap-up high at 99.70 missed the target by $3, but because it remains viable you should stay alert to the possibility of