ETN Eaton Corp
Reasons I like the bullish setup
1. On Oct 25th, earnings pushed the stock up very strong with very high volume
2. Since then it has been forming a bull flag pattern
3. The Industrial ETF, XLI is looking strong
4. The merger with Cooper Industries is a year old, they should be seeing those benefits
5. P/E 18, 2.4 Yield, Book x2.2, ROE 12% lot of value here
Enter the trade on the open tomorrow
My risk is 1R, which is defined currently as 0.3% of my trading portfolio
Setting my initial stop at 64.85 because:
a. 3xATR = 4.74, and 70.60(last close)-4.75 = 65.85
b. the low of the latest range is 65.20
c. willing to give this more room to trade since this is a value stock
Will move my stop up with the ATR as it moves into the future, won’t ever lower my stop. If I hit a 1R gain will set stop to lock in 0.5R profit. If I hit 2R gain will set stop to lock in 1R profit, beyond that eval new stops or taking some % off the table.
So maximum risk is 1R, or 0.3% of my portfolio. The risk per share will be the open price minus $64.85.
A reasonable positive outcome would be the stock does not stop me out and I am able to capture a 15-20% gain in the next 3-6months.