Alan Knuckman's Bullish Caterpillar Play

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Aug. 9 (Bloomberg) -- Trading Advantage's Alan Knuckman discusses hs options play for Caterpillar on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Let's take a look at stocks.

We are seeing declines in shares.

A couple of things are potentially in the market.

We have been talking to traders about a report out of paris that there was a bomb threat against the eiffel tower.

It turned are to be a false bomb threat, but it did hit the market to some extent.

Traders selling near the end of the european session, potentially putting pressure on things here as well.

And i want to get your update on options as well.

Alan knuckman frequently talked was about options.

We have been talking about better economic data out of china and how that has been affecting the metals factor.

Let's talk about caterpillar by extension.

This company recently cut -- came out and cut its forecast and talk about winning demand and commodities in emerging markets -- waning demand in commodities in emerging-market as well as australia and elsewhere.

We talked with metals miners that have been suffering.

They are at their lowest levels since 2009. that could affect the dollar weakening.

China has had a 12% bounce off of the lows in the last couple of weeks.

Caterpillar has not had that bounce, but it is trading roughly between 80 to 90 in the last year.

If it breaks about 85 right now, we have a technical wedge to project a target of 95. i think that is interesting because the stock has not gotten below 80, even though there has been a deluge of negative information.

Talk to me about what your strategy would be.

Essentially doma you are betting that york -- that the stock is going to go higher, not enormously, but a little bit.

The stock its substitution strategy, which is below the lowest for the year, it costs about $10.50. it is breaking away about $1.50 higher.

It is going to act much like the stock on the upside.

Like i said, my target on the stock is $95, and and $99 is a higher target.

This option would have a significant return because you've got the leverage using the options market.

Five and a half months is a long time.

Even though -- five and a half months is a long time.

Even though the support has held that we could get more negative economic data.

That is the point, that the auction last tuesday through the alps and downs.

The the -- the auction house to stay through the ups and downs.

Or you could get it to close on a weekly basis.

That is the we are would look at it.

We will be on the market again in 30 minutes.

This text has been automatically generated. It may not be 100% accurate.


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