The Federal Reserve cut the federal funds rate by 25 basis points to a target range of 3.75%-4.0%. There was a high probability (+90%) that another 25 bps cut would happen on Dec. 10, but that has declined to 65%. Meanwhile, consider trading Eaton Corp. (ETN) for a rally toward $415, explains John Eade, president of Argus Research.
The Fed cited slower job growth and rising downside risks to employment as reasons for the latest cut. The stock market yawned while Treasury yields across the curve popped eight to ten bps. The US Dollar Index rose and is again closing in on important chart resistance at $100.
Eaton Corp. (ETN)
Wednesday was another very narrow day for the stock market, as NYSE decliners led advancers by over 1,000 issues. That equates to winners/total NYSE issues of only 29%. NYSE up volume/total volume lagged again, coming in at 40%.
As for Eaton, it’s a diversified power management company benefiting from megatrends (such as the energy transition, electrification, digitalization, and infrastructure spending) that are driving growth in its end markets.
ETN has been a huge winner over the long-term, seeing consistent relative strength versus the S&P 500 back to 2009. Since a November 2024 peak, ETN appears to be tracing out a cup-with-a high-handle pattern. To complete this bullish formation, the stock needs to clear the $400 region.
That could open the door for some large gains as the shares have gone nowhere on a net basis since May 2024. We would put a stop-loss just under chart and moving-average support at $350. Resistance is at $400. We would take profits at $415 (with more gains possible over the long term).
Recommended Action: Buy ETN.
