The Cat Lands Smoothly

Published on Friday, 27 January 2012 15:08 Written by David Becker

New York, January 26^th (TradersHuddle.com) –  Caterpillar Inc., (NYSE: CAT) rallied into its earnings results that did not disappoint investors.  For the 4th quarter, Caterpillar reported overall profit of $1.55 billion, or $2.32 a share, compared with $968 million, or $1.47 a share, a year earlier. Sales and revenue, which also includes the company's finance business, increased 35% to $17.24 billion.  Analysts had predicted a per-share profit of $1.73 on revenue of $16.05 billion.

The company has rallied nearly 26% in January of 2012, breaking out to the upside and closing higher on all but three days during the month.  Resistance near $98 was sliced through early in the month, and is poised to test target resistance near $115.00. Caterpillar has been the leader of the Dow Industrials, and continues to benefit from global growth.  Support on the large cap stock is seen near both the 50-day moving average and the 200-day moving average near $95.00.

The moves of Thursday and Friday, have put the stock in above the 80 level according to the RSI, and could face selling pressure as investors look to take profit.  Additionally, the 50-day moving average has recently crossed above the 200-day moving average which historically been a sign of further positive momentum.

The MACD is showing and index level close to 1, with both the spread of the moving averages and the 9-day moving average of the spread moving higher.  Robust momentum should continue to carry the stock toward resistance levels.  The widening of the Bollinger bands reflect a market that is expanding in price action, and could continue to move higher.  Look for a break of the $115 area, which is an all-time high will likely target resistance seen near $130.00.