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Shares of Caterpillar Inc. (CAT) fell more than 10% on Tuesday morning after the company released better-than-expected third-quarter financial results. Revenues increased 18.4% to $ 13.5 billion, up $ 240 million from consensus estimates, and net earnings of $ 2.86 per share exceeded expectations of 2 cents per share . Despite solid results, the company maintained its outlook for the full year of adjusted earnings per share.
The decline in Caterpillar contributed to a sharp decline in the Dow Jones Industrial Average, which fell more than 2% shortly after the market opened. Although Caterpillar outperformed the earnings guidance, 3M Company (MMM) reported higher and lower financial results than the consensus and lowered its earnings guidance, accelerating Dow's massive sales.
From a technical standpoint, Caterpillar shares went from a double bearish pattern last week before returning to S2 support at $ 127.44 on Tuesday. The Relative Strength Index (RSI) seems extremely oversold with a reading of 17.86, but the Moving Average Convergence divergence (MACD) remains in a downward downward trend that could indicate a further decline.
Traders should monitor some consolidation after Tuesday's dip, given oversold RSI readings, but the medium-term trend is expected to remain bearish. The next big area of support is around $ 95.00, where the stock is consolidated in early 2017. If the stock bounces above the S2 support, traders could see a move higher to test again support S1 and return to the previous price channel.
Chart provided by StockCharts.com. The author holds no position in the mentioned shares, except through passive managed index funds.
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