$CAT retracing hard on a squeeze This is why I am

$CAT retracing hard on a squeeze

This is why I am very cautious about entering any short position, especially when it has moved lower already and just chops along support. This morning it gapped up from yesterday's close of 82.80, and is currently trading at 83.40. However, it is now entering an area of resistance on the daily chart of the 84.50 trendline and a 61.8 retrace.

Is this where I will go short via puts? No. I want to see all the shots get squezed out first and for this thing to get severely extended in a retrace while coinciding with multiple resistance areas.

I am looking for a move just below 86. By that time CAT should be extended off the lows and encounter resistance from the sloping trendline given out previously, the 20 day moving average, and also this is where the price broke down last time. This means that the upside of the stock should be considerably less than the downside which mitigates the chances of a gap up which is what we saw today.

When you trade put options, one gap up can kill you because it takes a substantial drop to make up for the loss in time value of money as well as the implied volatility that you lost in just one overnight move against you.