Eaton Vance Corp (NYSE: EV)

Eaton Vance Corp., through its subsidiaries, engages in the creation, marketing, and management of investment funds in the United States. It also provides investment management and counseling services to institutions and individuals. Further, the company operates as an adviser and distributor of investment companies and separate accounts. As of October 31, 2004, the company provided investment advisory or administration services to approximately 150 funds; approximately 1,300 separately managed individual and institutional accounts; and participated in approximately 40 retail-managed account broker/dealer programs. It markets and distributes shares of funds through a retail network of national and regional broker/dealers, banks, insurance companies, and financial planning firms.

Take a look at the 1-year chart of Eaton (NYSE: EV) with my added notations:

1-year chart of Eaton (NYSE: EV)

After its steep January drop, EV has been range bound since February. Over that period of time the stock has formed a clear resistance at $38.50 (red). In addition, the stock has also created a common level of support at $35 (green). At some point the stock will have to break one of the two levels the consolidation has created.

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The Tale of the Tape: EV has clear levels of support ($35) and resistance ($38.50). The possible long positions on the stock would be either on a pullback to $35, or on a breakout above $38.50. The ideal short opportunity would be on a break below $35.

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Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

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