The DOW look like it's going higher in the short term. Charts don't lie. CAT is is the clear out performer in the DOW. CAT will go up if the DOW goes up in the short term. Shorting an outer-performer which hasn't had a blown off top yet is just plain stupid. Check the chart, you will see this stock does not make significant drops until a blow off top has been acheived. So, either buy or stay away.
"A blow-off top refers to an extremely fast spike up in a stock's price, followed by an extremely fast and severe drop in price."
Why do I want to wait until "an extremely fast and severe drop in price" to short. Seems like shorting in the middle of a blow off top is the best.
I'm not saying Cat is a horrible company. They are doing great as a company. The stock price, however, has gotten way ahead of Cat the company. If the earnings do double in 2 years, that does justify today's price of $92. But that's 2 years from now.
There is no way the current price can be sustained. Especially with union contract negotiations under way. Now that Cat is doing quite well as a company, the union will have better bargaining in asking for more.
I'll short from here down to mid 70's by end of January and middle of Feb. Then I'll buy long and hold for the slow ride up to 100-120 by the end of 2012.
The blowoff top has not occurred yet. The blowoff will likely not occur until the stock price is well north of 100. So while a short now may eventually see a profit, you will be nursing that short position for likely a few months. Simple rule: YOU DON"T SHORT OUT-PERFORMERS....But if you want to gamble....it's your shirt to lose!