Caterpillar is under heavy pressure as the week comes to an end. On Thursday shares fell 3.8% with the help of a big bump in volume. This damaging breakdown pierced a key trendline that had linked the March/April lows. The 50D moving average, which has provided solid support since September, also gave way under this extreme selling pressure. CAT is off another 2.3% today as it dips below the April and May lows. This is quite a reversal of the action earlier this month when the stock put in a new high for the year.
We expect more downside in the near term. Initial support is near $200(January high). The 200D moving average, which has not been tested since the early August ‘Golden Cross”, is just below and is trending higher. A week from now the 200D will be approximately $196.50.