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“Sell in May and go away” is a well-known trading adage that warns investors to sell their stock holdings in May to avoid a seasonal decline in equity markets.

In today’s article, we take things a step further by staying in the market, but playing downside opportunities instead.

We used Profit Scanner powered by Recognia software to screen for bearish technical patterns breaking lower with historically reliable price formations. Of the 49 stock plays that appeared in the results, one in particular caught our eye.

Caterpillar (CAT) is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.

And in the past three months or so, shares rocketed higher as investors saw opportunity when the downward trend in place since early 2011 finally gave in to upside pressures.

But now it looks like profit takers and short sellers are back in full force…

That said, Profit Scanner recently locked on to a bearish “Head and Shoulders” pattern in CAT. This topping setup is created by three successive rallies in the price following a significant uptrend with highest high (head) is in the middle, flanked by two lower highs (shoulders) at roughly the same level.

Now, it’s not enough to discover a pattern in advance and leap in prior to its completion. Instead, we had to wait price until price broke through the neckline that connects each shoulder on a level, or near-horizontal plane.

In the chart below, we can see price piercing the neckline, continuing the downward slide and giving bears a reason to get excited until support near $61.75 is hit.

Sell (short) shares of Caterpillar Inc. (NYSE:CAT) at market. 

Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.