Caterpillar Stock Could Test 2018 Lows

Dow component Caterpillar Inc. reversed on Tuesday after failing to reach the high posted when April 24 earnings triggered an opening rally followed by a 17-point slide. In turn, this bearish price action could presage a decline to multi-month lows that also completes the last leg of a broad topping pattern, raising the odds for a breakdown that ends the equipment giant’s long-term uptrend.

Caterpillar needs cordial relations with China to continue on the fast track, but trade tensions are taking their toll. Meanwhile, the Asian nation just reported weaker-than-expected investment, along with a slowdown in retail and home sales. More ominously, business surveys noted a sharp decline in export order growth that may reflect local company efforts to avoid getting caught with unsold goods during a trade war.

In 2017, Caterpillar saw the first sales growth in five years, with the slump driven by a Chinese construction slowdown and weak oil prices. Meanwhile, first quarter U.S. GDP dropped to 2.3%, increasing reliance on foreign sales to keep Caterpillar stock within striking distance of all-time highs. Tariffs could drive a lethal nail into the company’s outlook, telling market players to keep a close eye on price action as we head into the summer months. (See also: Caterpillar Stock Whipsaws After Commentary Outweighs Guidance.)

 

Caterpillar shares reversed with the broad market on Tuesday and may head back to 2018 lows, completing a bearish top. …read more

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Category: CAT

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