ETN closes higher for the 3rd day in a row
Eaton Corporation PLC (ETN) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving higher for the 3rd day in a row, ETN finished the week 6.73% higher at 78.67 after edging higher $0.38 (0.49%) today, slightly outperforming the S&P 500 (0.24%) ahead of tomorrow's Memorial Day market holiday. Trading up to $1.35 lower after the open, the market managed to reverse during the session as bulls took control ending the day above its opening price. Ending the day with an indecisive close, neither buyers nor sellers were able to gain control during the session.
Daily Candlestick Chart (ETN as at May 22, 2020):
Friday's trading range has been $1.69 (2.16%), that's below the last trading month's daily average range of $2.54. Weekly volatility is also lower, being below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for ETN. Prices continued to consolidate within a tight trading range between 76.26 and 79.00 where it has been caught now for the whole last trading week.
In a volatile session, prices traded above the previous day's high as well as below the prior day's low, forming a bullish Outside Bar. Additionally, one bearish candlestick pattern matches today's price action, the Hanging Man. The last time a Hanging Man showed up on April 24th, ETN actually gained 4.67% on the following trading day.
After trading as low as 77.06 during the day, the stock found support at the 50-day moving average at 77.10. Prices are trading close to the key technical resistance level at 79.31 (R1). The share was sold again around 78.75 after having seen highs at 78.67, 78.62 and 78.46 in the last three trading sessions. Obviously there is something going on at that level.
Eaton shows weakness in the short-term (in accordance with its long-term downtrend) with only the medium-term trend still being bullish.
Buying might accelerate should prices move above the close-by swing high at 79.00 where further buy stops could get triggered. Selling might speed up should prices move below the nearby swing low at 76.26 where further sell stops could get activated. As prices are trading close to May's high at 82.89, upside momentum might accelerate should ETN mark new highs for the month.
Among the 12 market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "High close to previous three Highs" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for Eaton. Out of 28 times, ETN closed higher 67.86% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 82.14% with an average market move of 4.04%.