From Forgotten to Favored: Why Rockwell (ROK) Is the Automation Stock No One Saw Coming

SIA Charts’ relative strength rankings help investors identify opportunities in stocks which are outperforming their peers or index benchmarks on a relative basis. Outperformance often reflects improving investor expectations for strong company growth or sector growth. The rankings not only help investors to identify which stocks in a universe are outperforming and underperforming against their peers, but also when relative performance trends are changing.

With all the buzz in the markets about the Automation Theme as an industry of the future, today, we are going to look at Rockwell Automation Inc. (ROK). This is the first time we have highlighted ROK in our commentaries. Rockwell Automation Inc. (ROK) recently entered the Favored Zone of the SIA S&P 500 Index report on May 29th at a price of $314.93 and is showing extremely strong relative strength moves up the SIA S&P 500 report gaining 5 spots in the last week, 94 spots in the last month and 196 spots in the last quarter; exemplifying the consistent money flow increases in the shares over the past little while. Currently the shares reside in the 113th spot out of 505 positions in the report with the shares closing at a price of $324.33 on Friday.

In looking at the attached candlestick chart of ROK, we see some rather wild swings in the chart pattern where the shares trended sharply upwards in March 2020 to December of 2021, when the shares found a ceiling at just under the $340 level. Then a sharp downtrend ensued until June 2022 when the shares found a bottom at the $180.00 price point. Another uptrend materialized at that point until June of 2023, when the shares bumped their head again at just under the $340 level proving to be strong resistance. Then another sharp downtrend ensued once again until the shares found a floor at, this time, the $220 area which is above its previous low of $180 when the shares found support in June 2022. These wild trading patterns are typical in “concept” stocks that trade when investor frenzy in the industry is at its highest. Now, most recently, we see the shares in a very strong uptrend in the last few months and the shares coming up to the important $340.00 area which will act as a resistance point. This will be an area to watch to see if the shares can break above the $340.00 price point. If it does, an all time high will be accomplished and “new discovery" territory will be established. If the shares bump their head again at the $340 resistance point, support could be found at the $250 level and, below that, all the way down to $180.00. At this point, for a technical trader, the $340 resistance point would be the area to monitor closely if one were to be confident this uptrend can materialize into something more sustainable.

In looking at the Point and Figure chart at a 2% scale for an investment grade analysis, we see the shares hit resistance at $330.00 in November of 2021 and at a price of $337.00 in July 2023, which proved to be a bear trap as the shares closed one box above the November 2021 price level in the chart. Then the trend broke down and temporarily found support fours times in the $240 to $245 range in November 2023, January 2024, May 2024, and August of 2024. On the fifth attempt the bears took control and another downleg ensued before the shares found a new floor at the $218.00 level. Most recently we see the bulls take over and a very strong rising column of 17 X’s lasting boxes has materialized without even a three-box reversal.

Currently, there is upcoming resistance the $330.82 to $337.44 area. One may want to watch and see if the shares can close above the $351.07 level to guard against another “bear trap”. If it does, a potential new upleg could materialize where the shares are entering “new discovery” territory. To the downside, support is at its 3-box reversal of $293.76 and, below that, $266.07 and $245.81. The shares currently exhibit a bullish spread triple top pattern and with a perfect SMAX score of 10 out of 10, the shares are exhibiting strong near-term strength against the asset classes.

Rockwell Automation is a pure-play automation competitor that is the successor entity to Rockwell International, which spun off its former Rockwell Collins avionics segment in 2001. The firm operates through three segments--intelligent devices, software and control, and lifecycle services. Intelligent devices contain its drives, sensors, and industrial components, software, control contain its information, and network and security software, while lifecycle services contain its consulting and maintenance services as well as its Sensia JV with Schlumberger.