Caterpillar Inc. (CAT) - Revised Trade Strategy
Trade Setup: Anchored VWAP (AVWAP) Reversal Play
Rationale:
Post-earnings, Day 1 concluded with a bearish spinning top despite substantial volume, indicating indecision yet CAT’s price retained above the critical support level of $225. My initial bias was towards shorting on a potential breakdown below this support. However, the subsequent formation of a highly bullish candle that closed above the high of the previous earnings-related candle has shifted my stance towards a bullish outlook.
Execution Plan:
Monitor the 15-minute chart for a retracement to the AVWAP.
The stock must engage with the AVWAP to confirm its relevance as a dynamic support level.
Absent a touch of the AVWAP, the entry setup is invalidated, and no position will be taken.
A confirmed test of the AVWAP followed by a close above it will signify a shift in momentum to the buyers.
Upon this confirmation, a Limit Stop order will be placed just above a defined intraday resistance level. Concurrently, a Stop Loss will be established beneath an intraday pivot point, which also lies below the AVWAP, to mitigate risk.
Profit Targets:
The initial target is set at $233.72. Upon breaching this level, the next objective will be $240.00.
Half of the position will be exited at a profit level equivalent to 1.5 times the risk assumed from the entry point.
Risk Adjustments:
Continuous evaluation of the trade will occur, and further updates will be disseminated. This strategy, while more nuanced to articulate, is predicated on clear technical confirmations, making it more straightforward to execute in practice than to describe.
Trade Setup: Anchored VWAP (AVWAP) Reversal Play
Rationale:
Post-earnings, Day 1 concluded with a bearish spinning top despite substantial volume, indicating indecision yet CAT’s price retained above the critical support level of $225. My initial bias was towards shorting on a potential breakdown below this support. However, the subsequent formation of a highly bullish candle that closed above the high of the previous earnings-related candle has shifted my stance towards a bullish outlook.
Execution Plan:
Monitor the 15-minute chart for a retracement to the AVWAP.
The stock must engage with the AVWAP to confirm its relevance as a dynamic support level.
Absent a touch of the AVWAP, the entry setup is invalidated, and no position will be taken.
A confirmed test of the AVWAP followed by a close above it will signify a shift in momentum to the buyers.
Upon this confirmation, a Limit Stop order will be placed just above a defined intraday resistance level. Concurrently, a Stop Loss will be established beneath an intraday pivot point, which also lies below the AVWAP, to mitigate risk.
Profit Targets:
The initial target is set at $233.72. Upon breaching this level, the next objective will be $240.00.
Half of the position will be exited at a profit level equivalent to 1.5 times the risk assumed from the entry point.
Risk Adjustments:
Continuous evaluation of the trade will occur, and further updates will be disseminated. This strategy, while more nuanced to articulate, is predicated on clear technical confirmations, making it more straightforward to execute in practice than to describe.