Caterpillar, John Deere & US Steel (CAT, DE, X)

This article will review the status of some of the “Trump Trades” that I have written about previously. The 3 main trades that fall under the “Trump Trade” umbrella for me are Caterpillar, John Deere & US Steel (CAT, DE & X).

As I have been watching the market the last couple of days, I have noticed an increase in some selling pressure. Some stocks like nVidia (NVDA) experienced sharp pullbacks.

As the market rally continues to advance, the later stages will begin to involve a little more volatility. Keep that in mind when I start to discuss upside price targets in the later stages of this rally.

Caterpillar (CAT)

When I first wrote about Caterpillar (CAT) and John Deere (DE) in a combined article. I preferred John Deere over Caterpillar at the time since Deere was in the process of a breakout and Caterpillar was still in a consolidation pattern.

There was an article out today from Marketwatch.com on Caterpillar that had a concerning title.

“Federal agents probe 3 Caterpillar Illinois offices”

The timing of the article seemed to coincide with the drop in CAT’s share price this afternoon. While the article is scant of details and also states no arrests were made, I did want to mention it since this could be an additional, unknown risk for entering into this trade in the near-term.

This is a 3 year weekly candlestick chart for Caterpillar (CAT). I’ve provided for a general outline of how I think CAT’s share price will develop its Bullish Impulse wave pattern over the next couple of months.

Analyzing The Start of Wave 4 in a Possible Bullish Impulse Wave Pattern for Caterpillar (CAT) on Its Weekly Chart

With a MACD Histogram that is starting to show an increase in selling momentum, along with a failure to make a higher high in the last 2 weeks, CAT’s share price appears to be headed lower. How much lower? Maybe as low as the $[s2If !current_user_can(access_s2member_level1)]….

If you want to continue reading this article for Caterpillar, John Deere & US Steel, you must first login. I talk about the pullback areas to watch for Caterpillar’s share price as well as trading strategies for John Deere and US Steel.

If you are not a Trendy Stock Charts member, consider joining today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)]84 mark.

Since most Bullish Impulse Wave patterns have symmetrical Waves 1 and 5, I used that statistical probability and duplicated the length and angle of Wave 1. I then positioned the trendline so that it terminated at the 161.8% Target Line. That then provided for the pullback area of $84. That $84 mark is also the 61.8% Target Line area from the Fibonacci Extension Tool. That is another natural bounce or reversal place.

Start to watch the daily chart for a possible bullish reversal candlestick pattern once CAT’s share price breaks below the $90 level and towards the $84 area.

John Deere (DE)

This is a monthly candlestick chart for John Deere (DE) where I am looking at its longer-term buying momentum. It is still increasing, which is bullish. But the MACD Histogram does appear to be rounding off and could see a decrease in buying momentum.

Analyzing the Possibility of a Pullback and Re-Test of the Breakout Area for John Deere’s (DE) Share Price

A break below the $108.50 mark appears to be the indicator for lower prices towards the $100 level.

If DE’s share price continues to cooperate, any re-test of the breakout area around the $100 level in the next 2 months could be an opportunity to join the uptrend on its way towards the $$124 area. Having a little patience and trying to purchase shares below the $100 mark can provide slightly better returns when the $124 target is reached.

Purchasing shares on the first re-test of a breakout area is a lower risk way to enter a momentum trade. As long as the pullback to the breakout area develops on relatively light selling volume, start the scale-in process around the $102 area.

US Steel (X)

US Steel provided for an excellent trading opportunity after its most recent earnings report. I talked about any drop towards the $30 on earnings day as an opportunity for a bounce trade. US Steel (X) did not disappoint. After opening at $33.83 and dropping to a low of $30.71, US Steel’s (X) share price went on an approximate 30% run in less than 3 weeks.

After the 30% run-up was a good time to take profits as a Bearish Engulfing candlestick pattern developed after the run-up. X’s share price tried to rally this week but could not break above the resistance area from the

Analyzing Trading Opportunities for US Steel (X) Using a Trading Channel

Pullbacks to the $33 – $35 area represent a good area to start repurchasing any sold shares from the previous trade. From an Elliott Wave perspective, X’s share price should have at least 1 more push towards the top of its Trading Channel before a consolidation of the entire uptrend takes place.

Making a scale-in purchase in the $33 – $35 area is a good place to start re-entering the trade in anticipation of at least one more push upwards.

Summary

So let’s summarize the charts for Caterpillar, John Deere & US Steel.

• Caterpillar (CAT) has not made a new high since January 27 and is showing signs of selling momentum increasing. Have patience looking to enter that trade.
• John Deere (DE) has a MACD Histogram that is starting to show buying momentum that is rounding off. Anticipate more highs, but a re-test of the $100 breakout area is preferred first. This will help to shake out any sellers before the bounce ensues.
• US Steel (X) looks to have a lot of buying volume on its side. Look to purchase shares on any pullback as long as the MACD Histogram starts to show increasing buying momentum early next week. The $45 price level would be the sell zone a couple weeks down the road for this purchase (the approximate next upside touch of the Trading Channel).

This update was meant to look at support areas in the event of any continued market weakness that started during the middle of this week. From a longer-term perspective, we are still in the purchase the pullbacks phase. While it is tough to determine exactly how pullbacks will play out, I have tried to identify the areas I see as probable pullback areas.

Remember, if events do not go according to plan, ask for a re-analysis of the charts. Do no just purchase because it seems like more of a deal. Pullbacks that go past calculated price targets always mean a larger correction is at hand and a re-analysis is necessary. Rather than more of a deal, it could be more of a headache.

Good luck trading!