How To Play Caterpillar After Big Selloff

On CNBC's "Options Action," Tony Zhang said that Caterpillar Inc’s (NYSE: CAT) stock has been “largely rangebound” between $190 and $230. “A couple of days ago, we bounded off of the $230 upper band and I think that we’re headed back towards the lower band,” he added.

Check out other stocks making big moves in the premarket.

Looking at Caterpillar’s chart relative to its industrials sector, it is “currently forming this double top, after what has been a very strong relative performance since the November low,” Zhang mentioned. He added that this was a “good time to bet on what could be some underperformance.”

Caterpillar is trading at 17 times its next year’s earning, which is a “pretty rich premium to its relative history,” Zhang further stated.

Also See: DHL Hikes Parcel Delivery Prices For Private Customers

CAT Price Action: Shares of Caterpillar lost 3.80% to settle at $215.18 on Friday.