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Short-term challenge for Caterpillar’s stock

For those thinking Caterpillar screams “buy me” today, take a look at this chart of Cat’s trading range compared to the S&P 500 for the past 12 months:

Cat vs. S&P 500 trading channels

Note that since the bear marked kicked into high gear last summer, the S&P 500 has barely budged above the center of its RSI trading range. Meanwhile, Caterpillar is at the bottom of its RSI range today.

At some point the S&P 500 will rocket back to the top of its range and take everybody along for the ride. What strikes me as more likely in the short run, though, is that as the market digests more bad news, it grinds back toward the bottom of its range, making it highly difficult for individual shares to get much traction (especially ones where the immediate outlook is so bleak, like construction and machinery.)

Disclosure: I own no Cat shares.

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Tom Mangan posted at 10:29 am January 30th, 2009 |

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  1. benwaw58 says:

    I will buy at 29, and add to it wether it goes up or down and wait for another indrustial boom, while I draw div’s, may take up to 3 to 6 years, but this has worked since 1976.

    Permalink | Posted January 31st, 2009, at 7:57 am

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