Eaton Corporation plc operates as a power management company worldwide. Its Electrical Products segment offers electrical components, industrial components, residential products, single phase power quality, emergency lighting, fire detection, wiring devices, structural support systems, circuit protection, and lighting products. The company’s Electrical Systems and Services segment provides power distribution and assemblies, three phase power quality, hazardous duty electrical equipment, intrinsically safe explosion-proof instrumentation, utility power distribution, power reliability equipment, and services. The Hydraulics segment offers power products, controls and sensing products, and fluid conveyance products, as well as filtration systems solutions, heavy-duty drum and disc brakes, and golf grips. The Aerospace segment provides hydraulic power generation systems, controls and sensing products, fluid conveyance products, and fuel systems for commercial and military use. The Vehicle segment designs, manufactures, markets, and supplies drivetrain and powertrain systems, and critical components that reduce emissions and enhance fuel economy, stability, performance, and safety of cars, light trucks, and commercial vehicles.
Take a look at the 1-year chart of Eaton (NYSE: ETN) below with my added notations:
ETN started off 2014 by trading mostly sideway, but eventually the stock fell of a cliff in July, and then again in September and October. However, ETN has rallied nicely since that October low. During the entire year, the stock has also made a habit of finding either support or resistance at $70 (purple). A break above that level now should mean higher prices for the stock.
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The Tale of the Tape: ETN has a key level of resistance at $70. A long trade could be entered on a break through that level. However, if you are bearish on the stock, a short trade could be made on any rallies up to $70.
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!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach