Caterpillar posted earnings just before the Monday open and revenues missed analyst expectations. Additionally, the company reduced its 2013 profit outlook on declining demand for heavy mining equipment. Caterpillar's quarterly earnings came in at $1.31 per share, a large drop from the $2.37 per share seen last year. Revenues dropped to $13.21 billion, down from the $15.98 billion seen last year.
From a technical perspective, the stock is vulnerable to sharp declines if support at 80.40 is removed. Long term, the bias was already negative after failing at important Fib resistance at 100, which was the 61.8% Fib retracement of the move from above 114. To play this stock, look for an hourly close below 80.40, and then the bias turns to selling anything resembling a rally. Resistance is now seen at 81.20, so wait for the 80.40 break first and then enter into daily PUT options in CAT.
The CAT went as high as 83 so the bearish scenario is probably changed now, or at least it unfolds slower than we guess. I won’t trade this stock, because the overall market is still positive and it could lead the price even higher before a real drop is in place.
The Caterpillar revenues are badly hurt because of the week mining industry sails and it will affect the stock prices respectively. I think the Richard short idea is great and we will see lower prices for sure, but I will prefer to trade monthly options as it will be safer than weekly options.
CATs earnings are the past. the past was bad, we know this, earnings were a dissapointment. The big takeaway here is the future outlook of the company, the official release supported a bottom in slowdown and the company's CEO called a bottom for the business and the economy on live TV. Since stock prices are more about future expectations of earnings than past performance (not discounting the importance of past performance) I think the guidance and outlook are going to drive this stock higher, at least in the nearer terms. Technically CAT has made a bounce from long term support, if CAT retreats here again we'll have to watch closely for signs of strength or weakness.