Once headquartered in the U.S., Eaton Corporation (N:ETN) tax-inverted itself to Ireland for tax advantages.
This power-management company has taken it on the chin since May. But recent price action suggests it may be powering up for a drive higher. Take a look.
The chart above shows its fall from $74 in May to the low at $50 at the start of October. It saw 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, though, with a bullish engulfing candle, which looks to be a precursor to more upside. 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 would 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.