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Caterpillar Inc. (CAT) is one of the largest construction-equipment manufacturers in the world. It also has businesses in natural gas engines, machinery, mining, and other heavy industry equipment. CAT is listed on NYSE and is a component of the DJI and S&P 500 under Industrials.

Caterpillar's price has been bouncing between $183 and $230 since January 2021. On Jan. 19, 2022, the price drifted down in a Wyckoff sign of weakness (SOW) manner to test the low of range. The subsequent reaction was a rather steep rally with an increase in volume. The price then attempted on April 21 to test $230, which it failed to pursue above, and then formed a Wyckoff upthrust (UT). 

More bearish tell tale signs emerged with lower lows and an inability to rally up. Although the price managed to reach $229 on June 8, the price reacted with a steep sign of weakness that broke the support of $183. This came with a localized increase in volume that suggests the presence of supply. It formed a selling climax (SC) around $173 on June 23.

There were several secondary tests of the lows, but a rally back to $198 redefined a small range where the price tested on a few occasions. In late September, a Wyckoff spring action happened which was followed by the best Wyckoff sign of strength (SOS) rally thus far.

The breakout bar on Oct. 27, along with a spike in volume, is a bullish sign. It is further confirmed by the next few bars that stayed above $211. Currently, the price is in a Wyckoff back up (BU) range between $225 and $240.

Bias

This bias is bullish. According to the Wyckoff trading method, CAT is likely to test breaking out of $240 and rally up. Additionally, there is no threatening supply. If the price breaks below $225, it may retrace to find support at $210 or $200. The bullish trend in CAT suggests a market rotation from growth stocks to value stocks.

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