EATON CORP PLC

70.8 -0.31 (-0.44%) Sell

ETN investors looking to exit as part of sectoral rotation

13 min read

EATON CORP PLC was among the worst performers today. It delivered -0.44% to close at 70.8. During the last week it delivered -0.63% and saw a maximum drawdown of -0.74% before bouncing back.

[Themes containing ETN]

ETN is currently in a bearish trend. Over the last three months 2 bearish signals have generated a profit of +12.22% for investors.

Trend

ETN has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 14 Jan, 2016 to 11 Jul, 2017. Over the last 2 years 11 months and 9 days, ETN outperformed the SP500 index on 52% days.

ETN returned losses on 61% days in the last three months. During this time, it delivered on average -0.32% per day. It delivered it's worst daily return of -4.24%, during this period, on Wednesday, 24 Oct, 2018. The longest stort-term trend during this period was 6 losing days, which started on 17 Oct, 2018 and ended on 24 Oct, 2018. This bearish trend lost -12.9% of investor capital.

The last 12 months saw ETN's investors making profits in 5 months and incurring losses in 7 months. ETN was less consistent in delivering monthly returs than SP500 index. ETN was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -18.04% compared to -7.28% returned by SP500 index in Oct 2018. ETN had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Feb 2018 to Apr 2018) during which period it delivered -8.29%. It is interesting to note that both ETN and SP500 index significantly outperform during months when quarterly/annual results are announced.

"Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community.

ETN is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in ETN's volatility from 17 Sep, 2018 to 30 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that ETN has significant positive skewness in it's return distribution. This indicates that investors can expect ETN to recover from drawdowns quickly. Which makes ETN a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in ETN derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than ETN. Therefore, SP500 must receive a lower allocation than ETN in your portfolio. SP500 index usually has shorter drawdown period than ETN.

On a general note (since you are interested in ETN), TNDM has performed really well this year and deserves to be closely tracked for investment opportunities.

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