One Dow stock is emerging as the unlikely winner in the trade war

As U.S.-China trade tensions escalate, one unlikely winner is emerging: Dow component Caterpillar.

Shares of the industrial giant had fallen earlier this year on trade war fears, but they've rallied more than 7 percent this month, the best performer of all Dow stocks. Some investors see even more gains.

"It's right up to its 200-day moving average," Matt Maley, equity strategist at Miller Tabak, said Tuesday on CNBC's "Trading Nation." "That's the level it got up to in mid-summer and pulled back so if it can finally break above that line, it's going to be positive."

Caterpillar clawed its way back within range of the 200-day moving average in recent weeks after tumbling below that support line in mid-June. It ended Tuesday less than 1 percent from that longer-term moving average.

"It's also at the top-end of the downward sloping trend channel it's been in since those January highs so if it can break higher from here, it's going to be quite positive," he added.

The industrials equipment maker remains in a correction, having fallen 14 percent from its all-time high set in mid-January. At the year's lows in August, its shares were down 25 percent from the peak.

Boris Schlossberg, managing director of FX strategy at BK Asset Management, says trade headwinds continue to obscure Caterpillar's outlook.

"I am very leery of Caterpillar here," Schlossberg said Tuesday on "Trading Nation." "Even if the Chinese don't place any hard tariffs on Caterpillar, they could do what's called a soft tariff and kind of direct investment and buying away from them by jawboning."

Caterpillar, particularly vulnerable to trade, derives more than half its revenue from outside of North America. Europe, the Middle East and Africa comprise 23 percent of sales, while Asia-Pacific accounts for 22 percent.

"At this point I'd rather stand down and let the stock go by," said Schlossberg.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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