Caterpillar is a great business, but not a great stock right now, according to technical analysis using Barchart.com, plus a new indicator that simplifies stock investing.
Caterpillar (CAT), the blue-chip manufacturer of construction and mining equipment and member of the 30-stock Dow Jones Industrial Average ($DOWI) is an American icon. But that doesn’t make this nearly 100-year old company a great stock to own right now.
That can and likely will change at some point. But how do we ever know when?
The stock market’s version of March Madness increases the need for straightforward, understandable ways to quickly evaluate a stock’s chances of going up instead of down. Introducing the ROAR Score: Reward Opportunity and Risk.
CAT is the first stock I’m profiling using a combination of Barchart’s established, thorough, and popular technical analysis system, but with an added twist. The ROAR Score.
ROAR stands for Reward Opportunity and Risk, and it has a simple, straightforward mission: Help investors determine which way a stock’s price trend is leaning, and to what extent, to help them make higher-confidence buy and sell decisions.
ROAR scores are built by building on existing Barchart technical data, and adding a proprietary process that translates into a single percentage figure, updated daily for any stock or exchange-traded fund (ETF).
That said, ROAR does not speak in the same terms that many technical analysis methodologies do. “Buy, sell or hold” is not a part of its vocabulary. The existing Barchart chart analysis system does a fine job of directing investors across multiple time frames and using a wide range of traditional technical indicators.
ROAR does not need to replace any established technical analysis approach. Instead, it asks a different questions about any stock or even any ETF, in any global public market: Will the next 10% move in this stock be up or down?
ROAR is not expressed as an either/or choice. Because veteran investors have learned that any stock can go up in price for any reason. However, what often distinguishes the “high percentage shots” from the “long range jump shots” in investing is how much risk of major loss is attached to the pursuit of that potential profit.
Caterpillar Stock Is Not ROAR-ing Right Now
Using CAT as an example, let’s look at where traditional technical analysis leads us, and how the ROAR Score adds another dimension to help investors simplify decision making.
As of market close on Wednesday, March 19, the ROAR Score system estimated a 19% chance that CAT will rise 10% before it falls 10%. That implies an 81% chance that its next double-digit percentage move will be down. While so much of investment research currently focuses on whether a stock is a “buy” or a “sell,” much of the time, the evidence may not be that clear. Furthermore, some investors may have become less comfortable with making every decision a “binary” choice, since it has the potential to underestimate the “risk” side of investing.
ROAR also aims to remove an often troubling time element that can stress investors out. Stocks and entire markets have shown us repeatedly that they control “when” the stock price moves toward certain levels, not us. So, while it can be interesting to read about an analyst’s “year-end 2025 price target,” the 10% up or down approach employed by ROAR focuses more on what the next consequential change in the stock price will be, instead of setting a deadline or target date.
What Is ROAR Made Of?
This proprietary weighting of several technical factors is based on a combination of price direction, strength, and trend. It also deemphasizes the momentum element that potentially makes other systems highly momentum-based. Momentum is a wonderful thing investing… when it is positive. But it can be prone to overshooting on both the upside and downside. ROAR counters that modestly by interpreting the same data with a more risk-management focus. Thus, stocks that have just had giant price gains are less likely to generate very high percentage ROAR Scores.
In the case of CAT stock, its current score of 19 is toward the bottom of the normal range that stocks fall into. Just as nothing in investing is guaranteed (except volatility, perhaps!), ROAR rarely arrives at scores which are well above 80% and well below 20%.
When Does CAT’s ROAR Score Change?
ROAR Scores are determined at the end of each trading day. During periods of elevated volatility, due to market-wide factors or stock-specific events (earnings, analyst guidance changes, etc.), ROAR Scores will likely be a bit more volatile.
Again, the key element of this approach to price trend analysis is to take great data already provided by Barchart, and put a slightly more risk-averse tilt to it. And, to recognize that to many investors, not every “buy” or “sell” rating is the same. The degree matters, too.
How Can Investors Use ROAR Scores?
There is no limit to the use cases for the ROAR approach. However, one straightforward way this method can help investors think more like professional portfolio managers and risk managers is as follows. The higher the ROAR Score, the higher the position size (i.e. “weighting”) within a portfolio that could be implied.
Lower ROAR Scores do not mean a stock can’t go up 10% from here before it drops 10%. It simply means that the odds are longer that it will happen.
In this way, ROAR Scores are similar to how horse racing often works. The “favorite” in a race wins a lot, while “longshots” have a lower chance of winning the race. However, longshots do win races, every day. Just as every horse has a chance, and every team in pro sports games has a chance of winning, so it is with stocks as well.
Ultimately, it is up to every investor to determine for themselves how to use the wide range of investment decision-making tools now at our fingertips. By starting with Barchart’s traditional system of evaluating stocks using technical analysis, and overlaying a proprietary mechanism to translate data and ratings into a single response to the question, “what is the chance this stock goes up 10% before it declines 10%” the ROAR Score is a timely addition to the investor’s toolbox.
