Caterpillar Stock Could Bounce From Key Trendline

Industrial stock Caterpillar Inc (NYSE:CAT) is down 0.7% at $808.35, extending last session's 5.8% slide. Support at the 200-day moving average is keeping losses in check, however, and could serve as the springboard for an upswing if history is any indication. The $775 level provides another potential floor below, while the equity still boasts a 41% year-to-date lead despite pulling back from its June record peak.

Per Schaeffer's Senior Quantitative Analyst Rocky White, CAT has traded within 0.75 times the 200-day moving average's 20-day average true range (ATR), after spending at least 80% of the previous two weeks above the trendline. This setup has occurred eight other times over the last decade, after which the stock was higher one month later 88% of the time, averaging a 5.1% gain. 

Of the 23 brokerages in coverage, 12 carry a "hold" rating, compared to 11 "strong buy" ratings. This leaves ample room for upgrades, which could provide additional tailwinds for CAT.

For those looking to weigh in, options look like a good way to go. The equity's Schaeffer's Volatility Index (SVI) of 36% sits in the 27th percentile of its annual range, meaning options traders are pricing in low volatility expectations.