By Mike Paulenoff, MPTrader.com About 11 months ago, I told our members to watch for a continued rally in Caterpillar Inc. (CAT). The stock had exploded to the upside after breaking above 6-7 year resistance at 112-117. As it resided at just above 136, I wrote: "CAT still looks like it has unfinished biz on the upside into the 145-146 area next." I noted that while CAT certainly was overbought, "my work considers momentum to be in a 'healthy overbought' condition, rather than a divergent overbought condition. Usually a healthy overbought condition suggests that higher-highs will be forthcoming prior to the onset of a significant correction." CAT certainly complied with our analysis and then some, accelerating through our 145-146 target zone to a January 2018 high at 173.25. Since that high, however, CAT has naturally pivoted to the downside into a correction that has pressed to a low so far at 129.43, or 25% beneath the January high. The weakness coincides with current realities and ongoing uncertainties about trade with China. My pattern work argues that CAT remains in the grasp of a major correction of its prior up-leg from the January 2016 low at 56.36 to the January 2018 high at 173.25, and based on that larger, multi-year pattern formation, the price structure should press into the area of its 2017 upside breakout plateau in the vicinity of 110 to 115. Just for eco-political context (and for fun), I have overlaid "suggestive descriptive labels" of the various price moves (phases) since Trump's election, which represented a potential resurgence of mining and manufacturing industries, tax benefits, and fewer industry regulations (Phases 1 and 2). CAT currently is in Phase 3, which reflects the uncertainties of tariffs and perhaps the outcome of the mid-term elections on its business. If CAT, which is currently at around 132, presses to, holds, and U-turns off the 110-115 support zone, then based on my BIG picture pattern analysis, the price structure will enter Phase 4, anticipation of, and reaction to, the "tariff-resolution dividend period," which will propel CAT sharply higher towards a 210 to 230 eventual target zone. A sustained weekly break below 110 will reduce confidence in my current outlook.Mike Paulenoff is author of MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial! * I really like Mike's charts and analysis. This is shared with my readers here via MPtrader.com *Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal. If you liked this article, please click the LIKE (thumbs up) button. Feel free to leave any comments, question, or opinions. Follow us and check back occasionally for additional articles or comments.