Caterpillar (CAT) is one of my favourite stocks primarily as it can be a bellwether, and is also one I have written extensively about over the years, even prior to Donald Trump’s appointment. 2020 was a pivotal year for the company which saw extreme buying in March following the sharp Covid reversal but was the beginning of the long term bullish trend which has been in place ever since. More recently, the start of 2021 began with a period of congestion, but February’s price action saw the price move strongly from this region on good volume and continue through the $200 per share price to currently trade at the time of writing at $218.06. What is perhaps most interesting about the journey higher are the correction points which have seen the stock move lower, only for it to be supported by buyers moving in, a feature we saw in October 2020 and repeated in January 2021.
These are always classic signals where the down candle spread is narrow but the volume is high, thereby sending a strong signal of buying. From a volume price perspective, this is an anomaly and hence we can expect to see prices rise further as a result. |Moreover, the stock is currently approaching a low volume node and therefore the price is likely to move through this region relatively quickly a view confirmed by the trend monitor indicator for NinjaTrader which has remained firmly blue since June 2020.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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