Caterpillar's most recent trend suggests a bearish bias. One trading opportunity on Caterpillar is a Bear Call Spread using a strike $116.00 short call and a strike $121.00 long call offers a potential 48.37% return on risk over the next 23 calendar days. Maximum profit would be generated if the Bear Call Spread were to expire worthless, which would occur if the stock were below $116.00 by expiration. The full premium credit of $1.63 would be kept by the premium seller. The risk of $3.37 would be incurred if the stock rose above the $121.00 long call strike price.
The 5-day moving average is moving down which suggests that the short-term momentum for Caterpillar is bearish and the probability of a decline in share price is higher if the stock starts trending.
The 20-day moving average is moving down which suggests that the medium-term momentum for Caterpillar is bearish.
The RSI indicator is at 33.19 level which suggests that the stock is neither overbought nor oversold at this time.
To learn how to execute such a strategy while accounting for risk and reward in the context of smart portfolio management, and see how to trade live with a successful professional trader, view more here
LATEST NEWS for Caterpillar
Want a U.S. Recession? Try Trump’s China Divestment Plan
Mon, 26 Aug 2019 05:00:16 +0000
(Bloomberg Opinion) — Is President Donald Trump serious about forcing American companies out of China? His advisers talk like it.The president would have the authority for such a move, Treasury Secretary Steven Mnuchin and White House economic director Larry Kudlow said in television interviews while their boss was at the G-7 – though there’s “nothing right now in the cards,” Kudlow added.Trump had suggested the policy in a series of Tweets capping a week marked by tussles with the Fed and China: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”There’s a difference, though, between what’s possible and what’s advisable – especially given the way the world economy seems to be teetering on the edge of a downturn. Ten-year Treasury yields fell to their lowest level since 2016 and Hong Kong’s Hang Seng Index dropped the most in nearly four months Monday as fears of a deeper trade conflict ramped up.The U.S. president has extraordinarily wide-ranging powers granted by the 1977 International Emergency Economic Powers Act. There are around 29 national emergencies ongoing under the terms of the law, which was originally intended to ensure such decision-making didn’t get perpetually stuck in Congress. The powers were last invoked in May when Trump threatened tariffs on Mexico if it didn’t stop flows of migrants.The question now is whether Trump would follow through or, as in the Mexican case, fold. The likelier result is the latter because, as with the U.S. banking sector in 2008, the investments of American businesses in China are too big to fail.The U.S. had a stock of $107.6 billion in foreign direct investment in China in 2017, according to the Office of the U.S. Trade Representative – a figure that’s likely to be larger now in spite of trade tensions, since FDI stocks rarely fall outright. On top of that, it’s worth considering the $81.2 billion in FDI in Hong Kong and the $2.5 billion in Macau, given the risk that a crackdown by the Chinese government in Hong Kong threatens that territory’s special status – a prospect that’s already been raised by lawmakers and officials in Washington.What would sanctions on China look like? The act has mostly been used to freeze assets of targeted countries and prohibit U.S. businesses from transactions involving those countries; the tariffs proposed in May against Mexico were a relatively novel use of the powers. Either way, the stated intention would be to force American businesses to divest their assets in China, a sum that’s potentially as high as $191.3 billion.That’s an alarmingly large sum. The reduction in the value of U.S. commercial banking sector assets between their peak in December 2008 and their trough in March 2010 was only $801 billion, and that shift was enough to provoke a financial crisis from which the world is still recovering. Much smaller reductions can easily spark downturns: The decline in the value of U.S. commercial and industrial loans from their highest point before the 2001 recession to their low in 2004 was $231 billion, or around $310 billion in 2019 dollars.U.S. businesses forced to sell out of China almost certainly wouldn’t end up writing their assets down to zero – but in such a chaotic fire-sale, they’d be unlikely to get a good price. Beyond that, there would be a loss of revenue for businesses such as General Motors Co., Caterpillar Inc. and Boeing Co., which count China as one of their largest markets. That would compound the problem of servicing loans taken to acquire now-sold assets in the country.Of course, such a scenario is so dramatic as to be improbable. More likely, given the bipartisan anti-China sentiment in Washington, is a scenario where economic relations between China and the U.S. gradually dwindle over the years ahead.Even Trump probably wouldn’t follow through on a sudden stop and divestment, because the effects on the world’s already-shaky economy are simply too serious to contemplate. The idea of a forced withdrawal from China may be scary for U.S. businesses. In truth, it’s a paper tiger.To contact the author of this story: David Fickling at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
3 Major Casualties of China’s New Tariffs
Sun, 25 Aug 2019 11:09:30 +0000
The US-China trade tensions have taken a turn for the worse in recent days. On Friday, China announced new tariffs on $75 billion worth of imported American goods, and a resumption of the 5% tariff on automotive parts. The new tariffs, to set between 5% and 10% and come into effect in steps on September 1 and December 15, include levies on electronics and machinery. President Trump responded in his customary fashion, by Tweet, saying in part, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.” He added that the trade situation represents an opportunity for the US.Investors don’t seem to agree. Markets reacted to China’s and Trump’s announcements by plunging. Both the S&P 500 and Dow Jones averages fell 2.4% in Friday’s trading, and the tech-heavy NASDAQ slipped 3%. The losses were widespread, and not confined to any one sector of the market. Major companies with large exposure to the China trade were especially hard-hit. Here we take a look at three of those casualties. Apple, Inc. (AAPL)The world’s second largest publicly traded company lost 4.62% in the Friday market rout, falling over $9.80 per share. That Apple would prove particularly sensitive to shifts in the ‘trade war’ is no surprise; the Chinese market is Apple’s second largest, accounting for more than 18% of the company’s total revenues. The tit-for-tat tariff actions taken by the US and China have threatened the trade in electronics – and Apple’s supply chain. In response, the company is considering a drastic measure: the shift of 15% to 30% of its production from China to other areas of Southeast Asia. That Apple would consider such a drastic move underlines the risks of the trade war for the high-tech sector.Pointing out that nearly all of Apple’s flagship product line, the iPhone, is assembled in China, 4-star analyst Daniel Ives, from Wedbush, described Friday’s trade-war ramp-up as “a gut punch to Cupertino.” Even with that, however, Ives still sees Apple as a stock worth buying, and his $245 price target on AAPL shares suggest an upside of 20%.Despite the beating it took on Friday, AAPL retains its Moderate Buy rating from the analyst consensus. The stock has received 16 buys, 10 holds, and 1 sell in the past three months, with 6 of those buy ratings coming in just the last three weeks. Apple stock is trading for $202, and the average price target o $226 gives it an 11% upside potential. Caterpillar, Inc. (CAT)Caterpillar was hurting before this latest iteration of the trade conflict. The company is a major manufacturer and supplier of heavy construction and excavation equipment, with customers around the world. The general slowdown in the global economy has been eating into Cat’s sales, including in China, and the escalation in the tariff fight has made a difficult situation worse.The deterioration of Caterpillar’s position is made clear by the company’s losses in Friday’s trading: CAT stock fell 3.25%. The Friday losses come after CAT slipped more than 12% in August, following a 10.25% EPS reported for the second quarter.Cat hasn’t got an easy way out of its difficulties, either. According to 4-star analyst Jerry Revich, of Goldman Sachs, the construction industry is seeing rising inventories of trucks and construction machines; he predicts that there will have to be production cuts on the manufacturing end next year. In line with that, he gives CAT a Hold rating and a $130 price target.Stephens analyst Ashish Gupta agrees, saying, “For Caterpillar, excess dealer inventory means lower reported sales in coming quarters.” He goes on to add that, “The U.S. China trade war and Chinese impact on global commodity markets are reasons to avoid the stock right now. China accounts for a huge portion of global metals and energy consumption. A slowing Chinese economy has large ripple effects for the entire resource industry—a key consumer of Caterpillar products.” Ashish rates CAT as a Sell, with a low $100 price target.CAT is the lowest rated of the stocks in this list, with a Hold from the analyst consensus. The consensus rating is based on 7 buys, 5 holds, and 4 sells set in the past three months. The stocks’ share price of $114 and average price target of $136 still give it an upside potential of 19%. Deere & Company (DE)Like Caterpillar, Deere is a major manufacturer of heavy machinery; in this case, farm and agricultural equipment. And also like Caterpillar, Deere has been suffering as worldwide economic conditions have slowed down. And in a final similarity, Deere reported disappointing EPS in its most recent quarter, missing the forecast by 3.32%.China’s largest import from the US is agricultural products, especially soybeans. As the Chinese government cracks down on trade, with retaliatory measures, US farmers are watching their prospects for a profitable year go up in smoke. And that leads them to cut back on sales and maintenance of their heavy equipment, dealing a double punch to Deere in its domestic market. At the same time, the company is facing direct headwinds from the new Chinese tariffs. Deere stock lost 5.37% in Friday's market retreat. Rising factory production costs and bad weather, which would have been news stories in a normal year, have simply dealt additional blows to an already vulnerable company.At the same time, even with this perfect storm working against it, DE shares are getting upbeat reviews from Wall Street’s analysts. Writing from Credit Suisse, 4-star analyst Jamie Cook says of the quarterly report, “…expectations were sufficiently low heading into the print reflecting macro/trade war uncertainty, commodity prices and unfavorable weather which delayed planting,” and reiterates his belief that the company will beat the headwinds in the long run. He raises his price target on Deere to $197 (up 12%), suggesting an upside of 34%.From BMO Capital, Joel Tiss acknowledges slowing North American sales and a flat early-order program, but points out, “…the overall sales value was higher because of better take rates of innovative technologies and bigger machines.” Like Cook, Tiss gives Deere a Buy rating. His $175 implies a 19% upside potential.Deere is another stock with a Moderate Buy from the analyst consensus, this one based on 9 buys and 4 holds. The stock is selling for $147, has a $167 average price target, and an upside potential of 14%.Visit TipRanks’ Analysts’ Top Stocks tool, and find out which stocks are trending now Wall Street’s top market watchers.Disclosure: This author is long on AAPL.
On-off trade tariffs wreak havoc on U.S. company planning
Fri, 23 Aug 2019 19:22:05 +0000
Win Cramer thought his company was out of the firing line in the escalating Sino-U.S. trade war after his “Made-in-China” wireless headphones, speakers and earbuds were taken off Washington's tariff list a year ago. Little did the JLab Audio chief executive know that nine months later those products would again be targeted, posing an even greater risk to his California-based company. Earlier this month, U.S. President Donald Trump unexpectedly put off new 10% tariffs on about half of $300 billion of targeted Chinese imports until Dec. 15.
Dow's 100-point drop led by losses for shares of Caterpillar, Dow Inc.
Fri, 23 Aug 2019 13:45:00 +0000
DOW UPDATE Dragged down by declines for shares of Caterpillar and Dow Inc., the Dow Jones Industrial Average is falling Friday morning. The Dow (DJIA) was most recently trading 104 points, or 0.4%, lower, as shares of Caterpillar (CAT) and Dow Inc.
Why Is Caterpillar (CAT) Down 12.5% Since Last Earnings Report?
Fri, 23 Aug 2019 13:31:01 +0000
Caterpillar (CAT) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
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