United Technologies has been trapped in a very narrow range for the last three weeks. This tight yet choppy action followed the stock's steep selloff in early January. Shortly after, United Technologies dipped below its 2015 low on Jan. 19, the stock began to consolidate while holding near a major support zone. For patient investors, this healthy action is continuing as a new week begins. The result could be a powerful recovery move in the near term.
The steady distribution wave that hit United Technologies in early January drove the stock through the major lows of August and September of last year. Despite this severe damage, further downside was very limited. United Technologies dipped as low as $83.40 on Jan. 20 before quickly rebounding. Investors were starting to show interest in the stock as it tested the 2015 low. This process has extended well into this month as nearly four weeks of bottoming action has turned the stock into a low-risk buy.
In the very near term, United Technologies investors should keep a close eye on the $86-to-$83 area. The stock has shown a good deal of strength while holding in this support zone despite very heavy selling pressure. United Technologies should be considered a low-risk buy in this area as long as the January low is not taken out on a closing basis. On the upside, a rally past the current February high of $88.70 is a key hurdle. With a higher monthly low now in place and a divergent moving average convergence/divergence bottom taking shape, a close above $89 could spark a sharp rally.
Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long UTX.