Market Overview

Parets: Caterpillar Will Continue To Be One Of Dow's Worst Stocks

Parets: Caterpillar Will Continue To Be One Of Dow's Worst Stocks

JC Parets is a weekly guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick. Tune in to the daily broadcast live Monday-Friday at 8 a.m. ET here.

  • Caterpillar Inc. (NYSE: CAT) has been one of the worst-performing stocks in the Dow 30 this year, falling 29 percent compared with a 8.5 percent decline in the DJIA.
  • Eagle Bay Capital Founder JC Parets suggested that Caterpillar may potentially fall to around $58 in the near term.
  • Parets pointed to Caterpillar's long-term support levels around $80, which broke down in July. That, combined with a downward-sloping 200-day moving average, suggests that the stock has further room to fall, Parets argued.

On Friday, Gordon Johnson of Axiom initiated Caterpillar with a Sell rating and $28 price target. Johson argued that Caterpillar's 2016 EPS would be $2.79 – 38 percent below Wall Street expectations.

Eagle Bay Capital Founder JC Parets mirrored Johnson's pessimism in an interview on Benzinga's #PreMarket Prep, stating that the technicals don't look promising for a rebound. Parets argued that the best strategy has been to sell Caterpillar on strength, particularly since the stock broke below support at $80.

Now, the stock is acting like one of the worst in the Dow Jones Industrial Average, right along the likes of the beaten-down energy names. Caterpillar is "obviously" in the worst of the worst – and it has been one of them for a "long, long time," Parets said.

Parets also pointed to Caterpillar's downward-sloping 200-day moving average, which ended Friday at $81.44, as evidence of the stock's weakness. He suggested that the price could fall to $58 in the near term, a level that corresponds with its 61.8 percent Fibonacci retracement of its 2009 to 2011 rally.

Posted-In: Benzinga #PreMarket Prep Caterpillar JC ParetsShort Ideas Top Stories Exclusives Trading Ideas Interview Best of Benzinga


Related Articles (CAT)

View Comments and Join the Discussion!

The Crazy Week Of The Brazilian Real

Benzinga's Weekend M&A Chatter