Cummins (CMI) Plunges 3.4% Amid Sector Shifts and Cramer's Deere Preference – What’s Next for the Industrial Giant?

Summary
• Cummins (CMI) tumbles to $496.75, down 3.45% from its $514.53 close
• Jim Cramer’s recent endorsement of Deere (DE) over CMI sparks sector rotation
• Insider selling of $1.9M in CMI shares raises caution flags
• Industrial sector peers like Caterpillar (CAT) also underperform, down 4.86%

Today’s sharp decline in Cummins reflects a confluence of sector rotation, high-profile analyst commentary, and internal signals. The stock’s intraday low of $496.75 marks a 3.45% drop, with technical indicators and options activity amplifying bearish sentiment. As Cramer’s preference for Deere and Caterpillar’s struggles weigh on the industrial space, investors must assess whether this selloff is a buying opportunity or a deeper correction.

Cramer’s Deere Preference and Sector Rotation Trigger Cummins’ Sharp Decline
Cummins’ 3.45% drop is directly tied to Jim Cramer’s recent recommendation favoring Deere (DE) over CMI, signaling a shift in investor sentiment toward agricultural and construction equipment stocks. Cramer highlighted Deere’s potential to benefit from Chinese demand and crop price recovery, contrasting with Cummins’ exposure to the struggling freight market. Compounding this, Caterpillar (CAT), a sector leader, fell 4.86%, dragging industrials lower. Cummins’ own data center exposure, once a growth tailwind, now appears overshadowed by macroeconomic headwinds. Additionally, insider selling of $1.9M in CMI shares over the past week has amplified caution, with traders interpreting the move as a bearish signal.

Industrials Sector Under Pressure as Caterpillar (CAT) Trails Cummins’ Slide
The industrials sector is broadly underperforming, with Caterpillar (CAT) down 4.86% and Deere (DE) also facing mixed momentum. Cummins’ 3.45% decline aligns with the sector’s broader weakness, driven by prolonged freight market softness and regulatory uncertainty in the power generation space. While Cramer’s focus on Deere suggests a pivot toward agricultural and construction plays, Cummins’ data center and hydrogen initiatives remain unproven in a high-interest-rate environment. The sector’s struggles highlight a lack of consensus on which industrial subsectors will outperform in 2026.

Navigating the Volatility: ETFs and Options Strategies for CMI’s Uncertain Outlook
• 200-day MA: $375.52 (far below current price), indicating long-term undervaluation
• RSI: 62.43 (neutral, but below overbought threshold)
• MACD: 16.10 (bullish) vs. Signal Line: 16.76 (bearish), with a negative histogram (-0.66)
• Bollinger Bands: Lower bound at $462.51 (key support), current price at $496.75 (within range)

Cummins is trading near its 200-day MA but remains above critical support levels. The RSI suggests a neutral stance, while the MACD divergence hints at near-term bearish momentum. For options, two contracts stand out:

• CMI20260116P490 (Put, $490 strike, Jan 16 2026):
- IV: 24.53% (moderate)
- Delta: -0.38 (moderate sensitivity)
- Theta: -0.04 (slow time decay)
- Gamma: 0.01 (low sensitivity to price swings)
- Turnover: $49,505 (high liquidity)
- Leverage: 49.79% (high potential return)
- Payoff (5% downside): $13.25 (max profit if CMI drops to $472.06)
This put option offers a high leverage ratio and moderate IV, ideal for a bearish bet with manageable time decay.

• CMI20260116P500 (Put, $500 strike, Jan 16 2026):
- IV: 25.87% (moderate)
- Delta: -0.49 (strong sensitivity)
- Theta: -0.008 (minimal time decay)
- Gamma: 0.01 (low sensitivity to price swings)
- Turnover: $13,345 (reasonable liquidity)
- Leverage: 32.23% (moderate potential return)
- Payoff (5% downside): $3.25 (max profit if CMI drops to $472.06)
This contract balances delta and IV, offering a safer play for a moderate bearish move.

Aggressive bears should prioritize CMI20260116P490 for its high leverage and liquidity. If CMI breaks below $485.62 (next support), the $490 put becomes a high-probability trade.

Backtest Cummins Stock Performance
The CMI's performance after an intraday plunge of at least -3% from 2022 to the present shows favorable recovery and growth potential. The backtest data indicates that such events tend to lead to positive returns over various short-to-medium-term horizons, with the 3-Day win rate at 57.02%, the 10-Day win rate at 60.31%, and the 30-Day win rate at 62.28%. This suggests that while there may be some short-term volatility, the CMI has a strong tendency to recover and even exceed its previous levels in the aftermath of significant dips.

Cummins at Crossroads: Sector Rotation or Strategic Reentry Opportunity?
Cummins’ 3.45% drop reflects a sector-wide selloff and Cramer’s shift toward Deere, but the stock remains above key support levels. The $490 put option and $496.75 price suggest a potential rebound if the industrial sector stabilizes. Investors should monitor Caterpillar’s 4.86% decline as a barometer for broader industrials. For now, the $485.62 support and $514.53 previous close are critical levels to watch. If CMI holds above $485.62, the $490 put offers a high-leverage play; if it breaks below, a deeper correction may be imminent. Act now: Buy CMI20260116P490 if $485.62 holds, or short CMI into a breakdown below $479.31.