Caterpillar Inc. (CAT) shares rose nearly 5% on Tuesday after the company reported strong quarterly financial results. Third quarter revenue jumped 24.5% to $11.4 billion – beating consensus estimates by $770 million – and earnings per share rose to $1.95, which exceeded consensus estimates by 68 cents per share. Management also increased its full-year outlook to $44 billion in revenue – at the high end of estimates – and $6.25 per share in net income.

Analysts responded by increasing their price targets on the stock. Melius Research increased its price target to $172 from $168, citing further outperformance as revenues appear likely to overshoot. CFRA also increased its price target to $180 from $140, saying that Caterpillar remains well positioned for an improving global economy, with significant operating leverage on accelerating top-line growth. (See also: Do Fundamentals Support Caterpillar's Big Gains?)

Technical chart showing the performance of Caterpillar, Inc. (CAT) stock

From a technical standpoint, the stock broke out from upper trendline resistance to fresh all-time highs this week before consolidating on Wednesday. The relative strength index (RSI) has traded at overbought levels since mid-September, but third quarter financial results pushed it even further into overbought territory. The positive news for the stock is that the moving average convergence divergence (MACD) remains in a robust bullish uptrend.

Traders should watch for consolidation above trendline support at around $135 before any further move higher. If the stock breaks down from these levels, it could reach the middle of its previous price channel near R2 support at $130.52 or the lower end of the price channel at R1 support of $127.25. Traders should maintain a medium-term bullish bias on the stock given the favorable financial results, but the high RSI reading could suggest consolidation ahead. (For more, see: Why the Dow's Best-Peforming Stock May Rise Higher.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds. 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.