Sam Collins will be on vacation through June 25. Filling in
for him are two other top technical analysts, Chris Johnson
and Jon Lewis.
) -- We talked yesterday about
crossovers of moving averages
as proven technical indicators. We gave you
Novellus Systems, Inc.
), which was in a long-term uptrend, and a bullish crossover of its
20-day and 50-day moving averages.
Today, we're going to look more short term, using a bullish
cross of the 10-day moving average over the 20-day. Since such
crossovers often indicate the beginning of an uptrend, they provide
an excellent entry point for a bullish play.
Caterpillar has been on a solid run for the past couple of weeks
(even with yesterday's pullback). The shares used the $55 level (a
strike with heavy put open interest) as a foundation for the rally
that covered 24% using Monday's high at $68.35.
The rally has caused CAT's 10-day and 20-day moving averages to
bullishly cross for the first time since mid-February.
Note in the chart below how the previous cross came at the
beginning of a two-month rally that covered more than
The stock may pull back some more after yesterday's decline, but
that's OK. The shares showed some weakness in February after the
cross. Stick with it, and let the intermediate-term uptrend play
out. Look for a return to at least the $70-$71 area, the site of
the April high.
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