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SYMMETRICAL TRIANGLE


Caterpillar Inching Forward

03/05/02 07:51:23 AM
by Andrew Hetherington

For the past five years Caterpillar (CAT) has not been known as a market mover. It has bounced anywhere from $30.00 - $65.00 throughout this period. It is now time for a move upwards.

Security:   CAT
Position:   N/A

Figure 1 shows a weekly chart of Caterpillar Inc. A large 9-month symmetrical triangle formed in 2001 on very good diminishing volume and a strong breakout occured last week on almost 16 million shares. In addition to this promising development, CAT has dividend and equity growth from this point forward and makes a very attractive medium to long-term hold, particularly for those on fixed incomes.

My expectations are for a rise upwards to the all-time high of $66.44 that occurred in May of 1999, and to eventually surpass this resistance area. Keep in mind that Caterpillar is not a fast mover, but you should catch it at the right time if you purchase a long position in the low to mid $50.00 area.

Figure 1: Weekly chart for CAT.
Graphic provided by: SuperCharts.
 
On the smaller picture, shown in Figure 2, a strong breakout with 5.2 million shares occured last Monday, February 25, 2002. CAT then formed a flag for a very brief throwback and resumed the uptrend on Friday with a one-day reversal. Although the volume was not huge for this reversal, it was still significant. The volume picked up after moving away from this consolidation area, illustrating underlying strength.


Figure 2: Daily chart for CAT.

Naturally, short-term speculators might not think this style of play is for them, but when the pickings become slim it is food for thought.



Andrew Hetherington

Classic Dow Theorist who trades as a pure technician, using pattern recognition.

Toronto, Canada

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