Eaton (ETN) Long-Short Play
Updated
The time frame is the daily time frame for this trade.
If the stock closes at the contested zone on the higher side, initiate the trade and close the trade at the stop if the daily price closes above $110. Sale zones are highlighted in yellow to close the trade going into resistance at key price levels.
Can leave trailers on if the stock blows past the resistance zones on a profitable trade, but take 3/4 of the profits off the table to keep it as a profitable trade at that point.
Green Vertical Line:
Date the trade becomes in play, after earnings on Tuesday, November 3rd. Earnings for other companies have experienced drops the weeks prior. Took risky to be in before earnings announcement or a potential contested election on Wednesday. Will have more clarity on whether this is a trade on not on Wednesday afternoon or Thursday Morning.
Orange Lines (Dividend Dates):
Ex-Dividend is November 5th, which means risk for assignments on the credit side, so this will be a debit play. [Buying Pressure]
Dividend is paid out on November 20th. [Selling Pressure]
Expect directional pressure on those dates indicated by the arrow direction due to the dividend announcements.
Risk-Reward Ratio Short: 7.58
Risk-Reward Ratio Long: 4.64
If the stock closes at the contested zone on the higher side, initiate the trade and close the trade at the stop if the daily price closes above $110. Sale zones are highlighted in yellow to close the trade going into resistance at key price levels.
Can leave trailers on if the stock blows past the resistance zones on a profitable trade, but take 3/4 of the profits off the table to keep it as a profitable trade at that point.
Green Vertical Line:
Date the trade becomes in play, after earnings on Tuesday, November 3rd. Earnings for other companies have experienced drops the weeks prior. Took risky to be in before earnings announcement or a potential contested election on Wednesday. Will have more clarity on whether this is a trade on not on Wednesday afternoon or Thursday Morning.
Orange Lines (Dividend Dates):
Ex-Dividend is November 5th, which means risk for assignments on the credit side, so this will be a debit play. [Buying Pressure]
Dividend is paid out on November 20th. [Selling Pressure]
Expect directional pressure on those dates indicated by the arrow direction due to the dividend announcements.
Risk-Reward Ratio Short: 7.58
Risk-Reward Ratio Long: 4.64
Comment
ETN reported third-quarter 2020 earnings of $1.18 per share, which surpassed the Zacks Consensus Estimate of $1.05 by 12.7%.Comment
Another opportunity developed within this larger one. Entry at 109.80, tight stop loss at $109.52, upper target of $110.77 for the re-test of the session highs, will $111.29 being the next level if buying pressure is strong enough. Market is very bullish today, so that plus solid earnings, plus high probability of a retest makes this a nice 1:3 risk/reward trade.Trade active
Entry at 109.80.Trade active
Bull flag forming, tight compression, higher lows and moving average support underneath. Favorable move on entry. Scaled into the trade from base lot as price started making higher lows.Trade closed: stop reached
Turn around and hit the stop. SPY started heading south.Comment
Got out at a very small loss, but disheartening to see that price made the move I was expecting and I didn't re-enter the trade later. Next time I'm hedging into resistance, I knew the market maker was going to try and Shake Out.
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