The security could bounce off the bullish 40-day moving average
The shares of construction machinery name Caterpillar Inc. (NYSE: CAT) are down 1.2% at $234.04 at last check. The security is just now cooling from a May 10, all-time high of $245.77, though it remains up a notable 102% year-over-year. Another reason why traders should not dismiss the security just yet is that this recent pullback has placed shares near a trendline with historically bullish implications. In other words, Caterpillar stock could reach even more record highs over the next few weeks.
More specifically, the equity just came within one standard deviation of its 40-day moving average, after spending over two weeks above this key trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, nine signals have occurred in the past three years. Caterpillar stock enjoyed a positive return one month later in 89% of those cases, averaging a substantial 6% gain. From its current perch, a comparable move would put CAT just above the $248 mark, at a brand new record high.
A shift in analyst sentiment would create additional tailwinds for Caterpillar stock. Of the 16 in coverage, 10 carry a tepid "hold" or worse rating, while six say "strong buy." This leaves plenty of room for upgrades going forward, which could push shares higher still.
What's more, CAT premiums are a bargain at the moment, making now an ideal time to weigh in on the stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 29% sits in the 15th percentile of its annual range, indicating options players are pricing in low volatility expectations right now.