Non-directional strategy on Caterpillar (CAT).
CAT: short to long term
Today we talk about this stock in terms of a bullish long-term vision that may evolve in a medium long-term trend.
Looking at this short-term chart, we can see that a bullish “head and shoulders” pattern has been taking place and it’s now completing, unless markets live a reversal. A shy fall to area 70 – 70.5 may indicate a good opportunity for going long, but with a close stop loss that doesn’t exceed the lows in area 69. Level 73.5, surpassed last week – 02/06- , can identify the beginning of the bullish trend and, despite the low volumes, can suggest a non-directional strategy in options, in this case trading PUTS.
If we consider CAT in terms of a medium or long-term trade, we can expect a break out even in area 77$ which would complete the bullish pattern and push strongly stocks. The RSI too seems to suggest a potential bullish movement expectation.
We suggest firstly a short-term strategy, lasting one month and, if it goes in profit, we could turn it to a long-term trade.
We propose a BULL PUT
CAT: Expiry July 15 (before earnings), sold STRIKE 67.5, purchased STRIKE 65 to cover
Premium for the sale: 21$ Cost for the purchase $16
Maximum risk: 225$ ROI: 11.11%
The analyses and strategies described are for informational purposes only and should not be considered as investment advice or an indication to the purchase and / or sale of any financial product . Any information provided should not be considered as a reliable indicator of future results and the decision to operate on the basis of these suggestions it is at the sole discretion of the reader .