Don't Ignore This Chart

Caterpillar Tests Price Support, Nearly Fills Gap

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Caterpillar (CAT) was one of many beneficiaries of the latest quarterly earnings season.  With its revenues and EPS topping Wall Street estimates, CAT surged higher on April 25 from its April 24 close of 96.81.  The recent market weakness enabled CAT to pull back to test key price support and nearly test that gap support as well, setting up the stock as a very solid reward to risk trade at the current price and down into that support zone.  Here's the chart:

Price support resides near 98.00 and the zone from that level down to the 96.81 gap is where I'd look for buyers to continue to step in during periods of weakness.  I would expect the high from April 26 to provide resistance in the near-term.  The blue arrow highlights the extremely heavy volume that accompanied the gap higher.  Because of this heavy volume, gap support should be quite strong.

Happy trading!

Tom

Tom Bowley
About the author: co-founded Invested Central and served as the site's Chief Market Strategist for more than 10 years. His unique trading style combines both his fundamental and technical strategies to systematically manage risk while trading. A regular contributor to StockCharts.com's bi-weekly ChartWatchers newsletter since 2006, Tom's role at StockCharts has expanded significantly since he joined the company as a full-time Senior Technical Analyst in March of 2015. Learn More
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