Construction and mining machinery manufacturer Caterpillar (CAT) reported its third quarter earnings Wednesday, missing on both the top and bottom lines. Earnings and revenue were also both down year over year, and the company slashed its full-year guidance, blaming weak global demand from mining companies for its products.
CEO Douglas Oberhelman is sure that demand will return … he’s just not sure when. The uncertainty around this timing is not inspiring confidence among investors, who sold the company’s stock to the tune of 6.07% on the day.
On the multiyear chart looking back to 2009, CAT has a major support line in place since August 2010. This support line, currently around the $82.50-$84 area, was once again tested during Wednesday’s selloff. CAT has now tested this line about eight times this year — as I often say, the more often a line gets tested, the more violent its ultimate breach when it happens.
The stock now also trades below its 200-day moving average red line, which has continually offered as a rough area of resistance throughout 2013. From this multiyear view, CAT is nowhere near a good enough place technically to be traded from the long side — and in fact looks much better on the short side, particularly should the aforementioned support line snap.