What happens when the worst happens? Check out this video analysis on Caterpillar (CAT). (March 02, 2017)
CAT
Lets look at Caterpillar ( NYSE:CAT ). You can see this stock is still in a trading range between $100.00 and, for all intents and purposes, 90.00, but it is really more like 92.00. It is essentially slicing right through the 50-day moving average. Here is the top, there is the bottom, there is the 50, right there. And now the stock is coming up to a pretty good buying opportunity if you are interested in buying this stock. Now, if you know what the news is you are going like, “Dude, are you really just talking about Caterpillar? What about etcetera, etcetera.” So I will tell you what about.
There was a news report today, let me show you exactly when it was, RIGHT THERE, that Caterpillar’s ( NYSE:CAT ) offices were being raided by the IRS. Not really sure, but nobody knows what it is about. It probably has something to do with taxes. There were several articles that mentioned that the company had received a letter back in 2015; a subpoena about some things. Essentially, are you guys parking money or using other entities to get out of paying taxes that you should otherwise be paying? Never a good idea. Always enticing to think about, but never a good idea to avoid taxes. So anyway, you can see the kind of move that this thing had. So news like this is essentially disseminated in the market in a really quick amount of time, about an hour, before all the selling was done and then the stock has held up since then.
The point is, the market is always right. We could look at this and say, “Oh my gosh! That is really bad. This is it, that’s all. The uptrend is over, Caterpillar is done.” Don’t do that. The company is doing fine. I am not a huge defender of Caterpillar ( NYSE:CAT ); they make big machines. But the point is, just a trading point, you see a huge volume spike like this and that can be a problem. You see a huge volume spike like this back here and that was a problem too. It was a pukefest before the stock ultimately ran up 15 percent or so.
What I am suggesting is this: If I had to choose between buying or selling Caterpillar ( NYSE:CAT ), I would buy it in a heartbeat, because I can put a stop right down here. If the stock falls below this level, I am not even waiting for it to get to 90.00, if it falls below here then I am going to go ahead and sell that stock. But if there happens to be a news announcement about what this thing is and it occurs after market hours, if it is a bad thing, if it is a surprise to the market, the stock is going to gap down. At that point it is actually time to buy it, it will be a buying opportunity. Because what you are seeing with this huge volume is a lot of bad news and potentially even worse news being factored into the price of the stock.
So once it is actually KNOWN what EXACTLY the investigation is about; EXACTLY what the problem is, when you are saying, “Oh my gosh! That is horrible,” that is the time to buy the stock. Because you don’t have to look around to know that it is horrible if the stock is really down. Basically what I am saying is, traders shoot first and ask questions later. When they get the answers to those questions, that is when the stock starts running up again.
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