Caterpillar (CAT) – Defense in Mining – Sept 21st, 2020

Bullish – GM – $30.46

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Market Outlook:
The Nasdaq-100 (QQQ) showed some resilient this week, but ended on a weaker foot, breaking below its major support level of $270 on Friday. This puts the market in a neutral tone and back in correction territory with downside targets of $250. As investor sentiment turns more bearish and momentum approaches overbought, our base case for next week is to see further weakness but for markets to find more stable footing by the end of the week. 

Watch Tony’s CAT Trade Video on CNBC

CAT Trade Idea:
On CNBC’s OptionsAction show on Friday, Tony Zhang reviewed the sector rotation out of technology into industrials and mining. Both sectors have underperformed for multiple years, but started to outperform the market just this week. Expecting a rotation into these defensive sectors, CAT sits at the intersection of these 2 industries with a strong balance sheet and stable dividends. With a bright future with autonomous mining trucks, we expect CAT to benefit from global pickup in industrial and mining activity. With a neutral short term but longer term bullish view on CAT, Tony is buying an Oct/Dec $155/$160 Call Diagonal @ $6.24 Debit. 

We’ve structured this trade in OptionsPlay so you can analyze and view this trade along with the supporting technical chart at your convenience. 

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Market Outlook Update

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