Chart of the Day: How to Play a Name That's Not Bullish and Not Bearish
This stock seems to have found a bottom but it might take some time before it starts to move up.
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After a massive drop early last week on heavy volume we have seen Eaton Corp. ETN make an attempt to shore up the damage. Following that major stinger on January 27 when the stock plunged 13% on heavy volume, we were hoping the dip buyers would come in and add shares. That likely happened the following day with a sharp bounce and a close near the highs of the session. Since then, though, the stock is flatlining. It's not bullish, but it is also not bearish, either.
Let's look closer at the chart.
The indicators are bearish, but money flow remains positive as the stock works its way out of trouble. MACD (moving average convergence/divergence) and stochastics are still in shock from that big move down and portray a bearish picture, but mostly the momentum has been removed while the stock works on building a base. That process could last up to a couple of months, so we suggest being patient and using dips to buy more shares, just being careful if the stock slips underneath the lows from January 28 (following the big down session).
There is still good support from the September lows if that level above (call it $295) breaks. That support comes in around $280-$282. The longer the base is above that level the better chance of it breaking out as excess supply of stock is wrung out.
We like Eaton and rate it a Two in TheStreet Pro Portfolio, or "buy on dips."
At the time of publication, TheStreet Pro Portfolio was long ETN.
