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

September 27, 2015 7:10 pm
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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.

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