As a kid, I was semi-obsessed with bugs, insects, spiders, you know —a normal seven year old. I was a wild child though. I would often take ants and throw them into spider webs, just to see what would unfold. I loved caterpillars, such interesting creatures. Did you know that while in the larval stage, some will consume 27,000 times their body weight in food? Their job is really to eat. And then they change into an entirely new insect! A butterfly! That’s intense. Metamorphosis is truly remarkable.
Smart move for the company Caterpillar, to be a company that focuses on “sustainable world progress.” The company is solid and has been around for more than 85 years. In 2011, CAT had sales and revenues of $60.138 billion. Yep, with a B.
A LITTLE BACKGROUND
Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
It’s also part of the Dow Jones Industrial average and pays its shareholders about 2.8% dividend yield annually. Not too shabby.
STOCK CHART
$80 has been a very strong price in the history of CAT. In 2005-2008 it was a strong resistance / selling price. Now, since 2011, it has been a wall that not even a CAT bulldozer could break through. Since about February, 2013 CAT has been making lower highs but also making higher lows, forming a pretty nice symmetrical triangle.
The 100- and 200- simple moving averages are going totally sideways. IF CAT closes above $88.36 there is a lot of room for a bullish move. A triangle breakout is usually measured by the first range’s move. The triangle started February, 2013 at $92 and traded down to $80. That’s 12 points.
CAT bounced nicely off $82 recently. So, 82+12 = $94 at least. I expect $100 to be a much more reasonable target for CAT in the next few months. Because the Federal Reserve is continuing its propping up of the market with $85 billion invested each month, equities should trade higher and CAT will likely follow, transforming itself into a gorgeous butterfly and moving ever so gently higher.
This should be a fun trade. A lot of strategies could be played here. Just remember as always, to mitigate your risk!
