Markets
CAT

Caterpillar looks to extend Trump rally

What's Happening

Heavy machinery market Caterpillar ( CAT ) enjoyed a nice rally after the unexpected Trump victory, and the stock will look to extend its recent gains. The stock has been trending higher all year, and shares are currently up 35.5% on the year.

Technical Analysis

CAT was recently trading at $92.08, down $2.87 from its 12-month high and $35.72 above its 12-month low. Technical indicators for CAT are bullish and the stock is in a strong upward trend. The stock has recent support above $89.35 and recent resistance below $94.95. Of the 15 analysts who cover the stock, two rate it a "strong buy", 12 rate it a "hold", and one rates it a "strong sell". The stock receives S&P Capital IQ's 1 STARS "Strong Sell" ranking.

Analyst's Thoughts

After Donald Trump unexpectedly won the presidential election, money transferred quickly into heavy machinery maker Caterpillar. Trump promised to not only build a wall on the Mexican border, but also to significantly boost federal spending on infrastructure. Wall Street has been bullish on the stock all year, especially as the election neared and both candidates made it clear that they intended to boost the economy with increased spending on infrastructure. CAT shares have risen 8.7% since Trump became the president-elect, and the stock will look to build on its recent momentum moving forward.

Stock Only Trade

Bullish Trade

If you want to set up a bullish hedged trade on CAT, consider a January 65/70 bull-put credit spread for a 35-cent credit. That's a potential 7.5% return (39.3% annualized*) and the stock would have to fall 15.5% to cause a problem.

Bearish Trade

If you want to take a bearish stance on CAT at this time, consider a January 105/110 bear-call credit spread for a 25-cent credit. That's a potential 5.3% return (27.4% annualized*) and the stock would have to rise 14.3% to cause a problem.

Covered Call Trade

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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