CAT Trade Set Up

CAT is a former core short position from Q1 2012 which gained nearly 30% in just a few months. I lie CAT overall as a longer term short and it looks like it will be setting up again.

If CAT does indeed set up as these charts suggest, this would also mean that the market expectations we have had for that move above Friday's intraday high, are still probable. This may not seem to make any sense, but it is this area where the ground is most fertile for a fast and deep reversal and it is the area where we can get the best entries with the lowest risk.

 This is where we phased in to CAT the first time as a full size position, it did well for us.


 This is the weekly MoneyStream Chart, note the 2007/2008 negative divergence and how the 2011/2012 is not only negative, but leading negative a price is higher than 2008, but MS is lower right now, this is the house of cards Quantitative Easing built.

 The weekly 3C chart shows virtually the same exact thing and these are completely different indicators: Trend confirmation at the green arrow, a leading negative divergence at 2008 highs and a deeper leading negative divergence at 2012 highs with a new leading low being hit recently.

 The 60 min chart looks like CAT is setting up again as another decent short position, likely one of the core positions (positions we just leave alone and don't try to trade around them, just let them work).

 The 30 min chart is confirming the migration of the negative divergence. We just need the set up now.

At the shorter 5 min chart we do have a positive divergence, it is leading and even though we are right at some resistance, we should be able to get a move higher. I'd like to see a move above the green trendline with the indicators falling apart in to that move, that would be my ideal situation.

I'd keep CAT on your radar, it was an easy trade last time, we barely had to watch it, just let it do its thing.