NEW BULLISH Plays
Eaton Corp. - ETN - close: 57.69 change: +0.47
Stop Loss: 54.75
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on November -- at $---.--
Listed on November 24, 2015
Time Frame: Exit prior to earnings in February
(option traders exit prior to January expiration)
Average Daily Volume = 3.8 million
New Positions: Yes, see below
It has been a challenging year for ETN. Yet the action in the stock over the last few months is starting to look like a significant bottom.
ETN is in the industrial goods sector. According to the company, "Eaton is a power management company with 2014 sales of $22.6 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 99,000 employees and sells products to customers in more than 175 countries."
The company has lowered its guidance multiple times this year. ETN is dealing with weaker demand overseas. The strong U.S. dollar makes this worse. The company is forecasting at -5% hit to revenues due to negative currency headwinds.
ETN's most recent earnings report was October 30th. They missed the bottom line estimate by a penny. Revenues fell -9% to $5.2 billion, also below estimates. The company's CEO commented on their outlook, "As we begin to plan for 2016, it is apparent that markets are likely to remain soft.
To deal with such weak markets, we will be expanding our 2016 restructuring program. We had been planning on this second restructuring program, in addition to the $145 million program we announced in the second quarter of 2015, to be on the order of $50 million to $60 million, but in light of current market weakness we are expanding the program to between $90 million and $100 million."
These restructuring efforts are expected to generate almost $330 million in cost savings over the 2015-2016 time frame. The stock rallied on this earnings report and news about its restructuring plans. After plunging from the mid $70s in May to the $50 level this past fall shares seem to have found a bottom.
The market is always looking forward. It appears investors believe the worst may already be behind ETN. That could explain why investors have begun buying the dips. Shares now have a bullish pattern of higher lows and higher highs. The point & figure chart has turned positive and is forecasting at $69.00 target. ETN does have short-term resistance in the $57.80 area. We want to buy a breakout. Use a trigger to launch bullish positions at $58.05.
Trigger @ $58.05
- Suggested Positions -
Buy ETN stock @ $58.05
- (or for more adventurous traders, try this option) -
Buy the JAN $60 CALL (ETN160115C60) current ask $0.85
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike