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Cat Stock Blog

Caterpillar Inc. (NYSE:CAT) stock news and links


Quickie intro to charts

I’m no expert on charts or technical analysis (all I know I learned from Trader Mike) but I have picked up a few things over the years. Here’s the latest from Caterpillar:

Stock chart for Cat

About the indicators:

  • Stochastics show when a stock is “oversold” or “overbought.” Always remember a stock can stay oversold or overbought for far longer than you can stay solvent. Also: stocks can lose a huge chunk of their value going from the top to the bottom of this range, so saying “I’ll just buy when it’s at the bottom of the range and sell at the top” can be very costly because a stock that trades at 80 at the top of its range in October might be only at 60 at the top in November.
  • On-balance volume is a trend-follower’s friend. It’s reasonably safe to be long in a stock while the on-balance volume is positive.
  • Bollinger Bands narrow at trend changes. Whole books have been devoted to these bands; I just know some traders watch them like hawks.
  • Candlesticks offer clues on trend reversals. Long “tails” can point in the direction of the coming move. has an excellent Chart School to provide a grounding in what these and other indicators mean.

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Tom Mangan posted at 11:53 am January 8th, 2009 |

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