The Big 3: COST, BRK/B, CAT

get your podcasts. Welcome back to trading 360. I'm Marley Kayden. It's time for the big three. We've got three stocks three charts and three trades for you. Rick Duquette will take us through the charts here to take us through the trades today. Joe Teague Portfolio Manager, Equity Investments Joe great to have you on. I would love to kick things off with a big picture. Thought on the markets. We've got a nice green board right now. We're hanging on to the green and nice rebound from the sell off we saw but not enough to correct the week on the whole for us at least at the levels we're at right now. Thanks for having me. Yeah. I think this week has been hyper focused on interest rates and treasuries and the yields just rising. And that's very understandable. The market's kind of calibrating here. We got these higher oil prices. We have this increased spending from all these companies. Inflation is just going to be higher for the period of time. And that's a realistic concern for me. I think that's a very rational thing for the market to be doing. And just kind of readjusting here and kind of pricing these risk assets appropriately, thinking they're going to have to be borrowing at higher borrowing costs, having that. Having said all that, I think the base is still there for continued growth in the economy and continued success in the stock market. It's just going to have to be recalibrated with the exception or the understanding that interest rates will be a little bit higher and inflation will be running high. All right. So then let's talk about your first trade here. We're talking about Costco. We're going to hear from Costco on September 24th. So just a little over a month from now. How are you looking at Costco? Yeah, just, you know, we've we've seen the concerns out of Walmart. We've seen the narrative coming through maybe some crunch on some of the consumers. But yeah, I'm thinking in the world where you're seeing this higher inflation, you're seeing these concerns from customers. You're going to have these retail clients being value oriented. Of course, I love Costco. Of course, they're a company that has extreme customer loyalty. A lot of their revenue just comes from the fact that their customers are loyal to them, and their inventory turns over so rapidly. So I think they're somewhat sheltered from inflation. That happens in a very short shock. And I think in the long term, they're going to be a company that's going to be fine, especially in an environment where you see continued economic success. And in spite of higher than anticipated inflation. So I think the risk for Costco, of course, is their high multiple, very rich prices to be paid. Of course, that's something I'm very cognizant of. But in that in this environment, in this world where we're seeing, we're seeing what we're seeing higher interest rates, higher inflation expectations, but massive spending from these data center companies, massive inflow of capital into the economy. I think Costco is a be a good spot to be at and kind of like maybe not defensive, but more defensive than other places in the market to hide out during this period. All right. We got a good report from BJ's this morning as well. Perhaps that could be an indicator for Costco moving higher. Today on the session. We're up almost a percent and a half for Costco. But Rick as we look at Costco and its individual chart I mean it's it's up so far year to date. But it is underperforming the overall market. So what are you seeing in the technicals and what levels stand out. Yes. I would say as well too that after earnings we had a first of all we had our highs 1096 50. Then earnings were right here. We've kind of been range bound since then. We did have a sharp drop off from those highs. But for the most part we've stayed between this reddish line here 994 and these lows 907. So more of a sideways kind of grind with some volatility in the meantime here. So for further downside levels to keep track of our recent relative lows come in near 926. We also have another notable low point here near 917. If we were to push upward here, we would fill the gap near 956. And we also have highs near 979 and 988. So if we were to also think about our moving averages next, first of all, our prevailing price pattern here has been more of a symmetrical triangle connecting the highs up here and the lows here. So we have two lines kind of converging toward each other. We do seem to have broken to the downside from this one. But now we can also see that our five day and 21 day exponential moving averages come together right around 949, 950 or so. That lines up with our old trend line as well. So that gives us a confluence point to watch out for RSI moving lower. Here we have a downward trend line in play. We are below the 50 mid line as well here but perhaps poised to cross above that level here. So look to see if the bulls can reassert themselves and push above that resistance confluence. And in turn push the RSI above the 50 mid line here. So now if we look at volume profile, we can see here that our point of control comes in at about 945. We have our node between 935 to about 960 or so to the downside. Another node near about 912 or so to the upside, another one near about 1000. All right. Right now Costco again moving up on the session. We're up about 1.4% for Costco trading about. 94622 your next pick here we've got Berkshire Hathaway, the new CEO Greg Abel changing the investment strategy. A lot of announcements and headlines around positions. They're exiting positions. They're taking bigger stakes in new companies. They're looking at how are you looking at Berkshire and how it's positioned right now, Joe? Yeah, I mean, this is clearly the most defensive name of the three that I've put out there today. Obviously looking at, you know, just maybe repositioning outside of some of the pure growth names with these higher interest rates. I think they have a business that in in spite of their smaller assets, their core business is going to be centered around this insurance and reinsurance pathway. They have, of course, railroads and, and everything like that, even in oil infrastructure play. So yes, it's very defensive name. If there is going to be a sustained growth and higher inflation, just kind of tricky for some of these growthy names. This is going to be a great period for Berkshire. So yeah, I think this is absolutely for me a time to be looking at companies like this that are going to be able to weather the storm regardless of what pricing is doing. All right. Rick. So as a defensive play, if we look at the setup for Berkshire Hathaway, what are you seeing in the technicals here. I mean this is a beloved name with a new person at the helm. We don't have the Oracle of Omaha anymore. But still of course very closely tied to Warren Buffett. Sure. Not too terribly much move over the past 251 days. We're only up about 2% from there. If you would have asked that question maybe a few weeks ago, it would have been pretty different. We had highs of five, 37, 74, but those have mostly evaporated after earnings. We had a very sharp rally off of this repeated floor that we tested near 486. We also had a small gap here that was formed. That's around where we had our lows near about 499 or so. A high point here 507 another high near 515. Those stand out as levels to watch for further resistance as well. Our trend line is still in play here too. We are on the verge of potentially pushing beyond that boundary here. We also have a downward sloping trend line that we could also take into our calculations here as well. So look for a breakout beyond either of those two levels for further directional bias. So now in this case our moving averages are a bit more mixed up. Here we have our five day EMA in dark blue. We have our 63 day EMA in gold here. Those come together roughly 4.98 to 500, both of them here. So this is a general area of importance from a supportive level here. If we were to break lower, the 251 in orange comes in near about 4.90. If we were to push higher, our teal 21 day comes in at 505 and roughly lines up with our downward sloping trend line. So some notable inflection points here to consider. RSI has shown a break down below our green trend line. We are below the 50 mid-line. But also today it looks like our red downward sloping trend line is being broken as well. So if we do start to push upward again like our last chart, look for a push above the 50 mid line and for RSI to make new highs above its relative highs that we saw a few days ago along with price volume profile in this case is pretty straightforward. We can see that much of the trading activity has taken place here between about 490 to 5 oh. Five. Point of control is around where we've solidified during the past couple of days. For now, near 497. All right. And Berkshire, as you mentioned, pretty much unchanged on the year as we look at its chart overall. But this last one a very different story. If we look over the last 52 weeks, we're up close to 100% for caterpillar, which is becoming more and more a part of this broader AI conversation. Joe. So why caterpillar? How did it make it in the big three today? Yeah, this is of the three. This is the most cyclical choice. It's very tied to the AI infrastructure spending play. It's tracking a lot of the semiconductor stocks. But what's different from them from the hyperscalers different from the chip makers is doesn't matter if their next chip isn't the best on the line. It doesn't matter if they're large, large language model falls flat. They don't have any of that. They're just picks and shovels play. If the if the spending continues to be there, which it has continued to rise, people are going to need to build data centers. They're going to need to build buildings. They're going to need to move dirt. They're going to need these big machines, which caterpillar is one of the few companies that offer. So yes, I absolutely think this is a is a play for that. You know, of course, obviously they also are now gaining a lot of traction with their power generation, their turbines, which are really important to this data center move. And again, this isn't going to be a narrative of, oh, oh, they don't have the best model or they're not meeting some benchmark. You know, maybe China has a better model right now. It doesn't really matter for caterpillar. It just what really matters for them is that these companies are going to continue to spend and continue to invest. And every indication that I've seen over the past year has been that these companies are continuing to spend, they are continuing to to invest. They believe in this future. And of course, caterpillar will be the picks and shovel beneficiary. All right. So as we look at caterpillar, we had some pretty steady momentum in this name all the way through July. But then since July it's been under some pressure in that momentum has fallen off. So what levels are standing out to you here? Something about an AI controlling a giant bulldozer makes me feel a little queasy, I got to say. But, you know, to think about I see Joe's point, obviously just kind of being light hearted, but still we can see highs 1073. We have our trend line pointing downward here to give us a downward sloping trend line that is still in play. Meanwhile, we have this gap that formed here to give us some recent lows. We can see that that very modestly mild sloping upward trend line is still in play as well. So horizontal levels 776. And then our gap that we just mentioned here come in comes in at about 752 to 727. We can also see this was a repeated floor many times around 665. Meanwhile to the upside, another similar floor here near about 850 or so. Kind of a little muddier at this point here, but that's still is a notable area that traders may have their eyes on here. Another series of highs and subsequent lows near 933 as well stand out. So when we consider our moving averages in our next case here, the shorter term trend shows more of a downward trajectory here. Our five day 21 day and 63 day are all pointing downward. They're somewhat pulling apart from each other, which suggests the trend is not changing back to up yet. We're upside yet here, but our five day EMA in dark blue 82855 is where the next resistance area would be. Notice as well our 21 day lines up with our trend line near about 852 RSI below 50 once again here. So not really a super clear trend at this point in the shorter term. So again look for a crossover above 50 if you're more bullish or push below 30 if you're more bearish. Volume profile shows we have some very distinct nodes here. So it's kind of a little more choppy. But the areas in question stand out here near about eight, 158 20 or so. One more to the downside between 750 to 775. Another more prominent one as well. A bigger one here, 860 to 915 roughly. All right. And caterpillar today just trading about a half a percent higher on the session at 81911. Joe really appreciate you being with us for the big