This Stock’s Big Rally Is Looking Stretched

[Trading With Larry Benedict]( This Stock’s Big Rally Is Looking Stretched By Larry Benedict, editor, Trading With Larry Benedict With all the hype around AI and tech stocks this year, traders may be tempted to bypass less “exciting” parts of the market like industrial stocks. But in doing so, they have missed out on some outsized gains. One of those stocks is Caterpillar (CAT). CAT is the world’s largest manufacturer of construction and mining equipment. And it has been on a tear. In just two months, CAT rallied 43% up to its recent all-time high. That put CAT on track for an 83% gain in less than a year. But now CAT’s momentum is looking stretched. So today I want to check out what’s coming next… Recommended Link [Another Teeka Pick For A Huge Payout?]( The world's most trusted cryptocurrency analyst and investing expert, Teeka Tiwari, picked Tesla before it took off… [image]( Today, he’s taking a close look at a company whose shares could skyrocket. The world’s largest asset manager BlackRock already invested $3.3 billion in this company. Vanguard, another Wall Street giant, has invested more than $3 billion. And Bank of America has invested more than $500 million in this single stock. [Everything you need to know about it is revealed right here…]( -- Surging Momentum CAT bottomed out in September last year. But as soon as buying momentum returned, it rebounded: Caterpillar (CAT) [Image] Source: eSignal CAT’s rally off its low coincided with the Relative Strength Index (RSI) breaking out of oversold territory (lower grey dashed line). That rally gained steam as the RSI surged through resistance (green line) into the upper half of its range. Adding to the bullish sentiment, the 10-day Moving Average (MA, red line) crossed and accelerated above the longer-term 50-day MA (blue line). But after rallying 65% off its September low, CAT’s rally petered out and reversed in late January. CAT drifted lower through June as the RSI got stuck in its lower range. When the RSI is trapped in its lower half like this, it means buying momentum has dried up. And it is impossible for a stock to sustain any rally. Even a big Q1 earnings beat failed to stop CAT’s ongoing slide. Yet [when we checked out CAT on June 14]( (red arrow), a promising new rally had just broken out. CAT got a fresh surge of buying momentum. Plus, the 10-day MA crossed above the 50-day MA with both moving sharply higher. Take another look: Caterpillar (CAT) [Image] Source: eSignal Yet after rallying strongly on a Q2 earnings beat, CAT ran into short-term resistance around the start of August (red line). Despite briefly piercing it, CAT hasn’t gained any traction above this level so far. Simultaneously, the RSI has been trending lower from overbought territory (lower orange line). So with CAT’s rally hanging in the balance, what am I looking for around here? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Breaking Resistance During any rally, a stock will periodically run into resistance. This is a level where stockholders are happy to bank profits and speculators take out short positions, believing that a stock has run too far and could be due for a pullback. That is what we’ve been witnessing so far this month with CAT. Ultimately, if buyer conviction returns, the stock will break through resistance and test a higher level. Breaking through short-term resistance is necessary if CAT’s longer-term rally is to remain intact. That’s why I’m keeping a close eye on momentum. As I mentioned, the RSI has recently slipped lower. If momentum continues to fall, it will become increasingly difficult for CAT to maintain its rally. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag We just closed out a winning oil trade in One Ticker Trader. One reader shared her thoughts: Hi, Larry, The videos and updates are super helpful. I just made $30 on my first trade with you on USO. Still hoping on SPY. As a retired teacher, I’m getting hammered, but I’m learning all I can from you; this could make a real difference to me. Thank you for help for the small investor. – Angela S. Thanks for writing in, Angela. We’re so happy you’re enjoying our trades and content. If anyone wants to join us, you can learn more by [going right here](. IN CASE YOU MISSED IT… [Reverse ‘money machines’ popping up across America]( Machines like the ones in the picture below are popping up all across America. If you’ve been to a concert venue, stadium, or airport, you’ve almost certainly walked by one without knowing. The experts are calling it a ‘Reverse ATM’. They’ve been installed at places like Citizen’s Bank Ballpark in Philadelphia… They’ve even been used at the Super Bowl. Why are these machines suddenly appearing out of nowhere? And what does it mean for your money? We’ve recently arranged an interview with former Goldman Sachs managing director, Dr. Nomi Prins, to get her take. There’s nobody in America who’s more aware of the inner workings of the banking system. In the interview, [Dr. Prins explained these strange ‘reverse ATMs.’]( And she said she expects them to play a key role this Summer as our nation’s financial system is overhauled for the first time since 1971. According to her research, many Americans will be blindsided by what’s to come. BUT, folks who understand the ‘Reverse ATM’ phenomenon before it becomes obvious to the average American could actually profit in the weeks ahead. 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