Powering higher with Eaton

• Posted by Greg Harmon
• on November 5th, 2015

Although Eaton Corporation ($ETN) is no longer based in the US (the company moved to Ireland for tax advantages), they have a pretty big US Headquarters right down the street from me, next to Lifetime Fitness. I took a field trip today to get my own artwork above.

This power management company has had its stock take it on the chin since May. But recent price action suggest that it may be powering up for a drive higher. Take a look.

The chart above shows the fall from $74 in May to the low at 50 to start October. This was a steady fall until early September, but then the price action morphed into more of a sideways consolidation. The late August and early September peaks at 57.50 acted at resistance and it swung lower.

It made it back to that resistance Wednesday but with a couple of candles with upper shadows. A possible topping formation. This looks to be resolving to the upside Thursday though, with a bullish engulfing candle. This is a precursor for more upside. And a Measured Move off of the 53 base to here would target a run to 62.

That would be just above the August high, but more importantly confirm a reversal from the downtrend. The momentum indicators are bullish as this happens. The RSI is in the bullish zone and rising with the MACD rising. The Bollinger Bands® are also turning up and opening.

The stock went ex-dividend Thursday so there are no games to be played between now and the earnings report at the start of February. Watch for a break above resistance to buy the stock for an upward move or use the January 2016 Expiry 57.5 Calls (offered at about $2.00) for a defined risk trade.

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