THE NAUGHTY CHARTS' WINK
Caterpillar is such a strong and reliable company with high yield dividend. We love it. When it rallies, it rallies hard. When it drops, it breaks your jaw. We love the cyclical nature of the core business at the heart of Caterpillar: mining.
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the naughty thoughts
We love it at $85, and we love it below $80. So if you are into high quality companies with a delicious yield, then this is the one for you. The recent drop from their $110 highs has nothing to do with Cat itself but the playground where it plays. Don't believe me? Take a look at other companies like $JOY which also has been kicked in the back of the head.
We believe we are at the middle of the mining drought cycle that appears every other 4 years or so. In this cycle, CAT trades sideways, held only by the buybacks, dividend, and effective cost cutting techniques. This is the perfect time for accumulation. And we have identified a similar trend as experienced in 2012 when this pussy cat traded between $80 and $85. Anything below $70 is an automatic pounding of the table. The company is 10 times leaner now than before. The quality of their products is on the rise. The forces that will keep the pressure on Cat are beyond their control: commodity prices, oil prices, mining slow down, strength of the US dollar, China slowing down, etc. These are all cyclical events that will pass. And when they do pass, we want you to be better positioned to gain. |
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If you and/or your significant other are swingers, then take a look at the chart below. There are two well defined multi year levels of resistance and support. We added Fibonacci lines to help you visualize the targets. $88 is an upper limit held down by the 0.382 line, for us any attempt at it is a definitely sell (of course taking into account they why it head there). The support at $81 is protected by the latest double bottom bounce at $78 and the start of our Fib trace lines. As long as dividends are held, mining does not crash, and we remain on status quo with everything else mentioned above, your easy targets are: Buy at or below $80, sell at or above $85.