Back on Oct. 21 we wrote about Eaton (ETN) . We said, "Eaton has been outperforming the S&P 500 but it has recently started to lose some of its vigor and we are starting to see some weakness in our favorite indicators. None of this implies a major top pattern but it does suggest we should be on alert for a soft patch or a correction."
Since Oct. 21 ETN has declined to a new low for the move down and just closed below the rising 200-day moving average line. Should we be more concerned? Should we suggest that you raise your sell stops or reduce your positions?
This daily chart of ETN, above, has become a little more bearish in the past week. Besides making a new low for the move down and breaking the 200-day average line, the volume of trading in ETN has increased recently and the On-Balance-Volume (OBV) line has also made a new low for the move down. A declining OBV line tells us that sellers of ETN are being more aggressive with a heavier pace of trading on days when the stock closes lower.
The Moving Average Convergence Divergence (MACD) remains below the zero line with fresh sell signals.
This three-year weekly chart of ETN, above, has also weakened. The week isn't over but for now ETN has closed below the rising 40-week moving average line. The weekly OBV line has edged lower and the MACD oscillator is still bearish.
ETN is probably going to weaken further but the real line in the sand is the $58 level. A close below $58 could open up the way for a deeper decline toward $52. Not terrible, but it may take longer before the bull returns.