Buy Alert: October 23, 2012

Marcus Haber | October 23, 2012

Buy Alert: October 23, 2012

Trade Details

Buy Caterpillar (CAT) November $87.5 Calls for $0.90 or better

Why?

CAT shares have pulled back this week on mixed earnings news. On the positive side, the company beat earnings expectations for the quarter. Unfortunately, management also lowered forecasts on expectations of sluggish economic growth continuing through to the second half of 2013.

Here’s the thing…

CAT is too strong of a company to experience a sustained selloff in this kind of choppy market. Any decent bit of economic news will give the shares a boost.

Even better, the stock is right at an important support level. Moreover, the share price is already below the 50-day and 200-day moving averages. Chances are, we’re near the bottom. I could easily see the stock head back to the $87.50 to $90 level shortly.

Let’s grab the November $87.5 calls while the stock is down.