My trading idea for this week is a company that is experiencing rising sales and profits, despite the weak overall economy in the United States. The company is experiencing a steady flow of orders, cutting costs, and has been able to pay a dividend for 74 years without missing a beat.

Based on solid fundamentals and technicals, I think the stock appears poised for take off.

The company is United Technologies Corp. (NYSE: UTX) — an industrial conglomerate that makes Pratt & Whitney jet engines, Carrier air conditioners, Sikorsky helicopters and Otis elevators. The company is the world’s largest maker of elevators and air conditioners.

Based on overall strength in industrial machinery, orders keep coming in for the company’s fuel-efficient jet engines and stealthy helicopters. Sales are also rising in its Otis elevator division.

United Technologies is also carefully tending to its bottom line through aggressive restructuring and cost cutting. The company has so far managed to trim expenses by more than $121 million so far this year by divesting under-performing businesses, closing ailing plants and moving production facilities to low-cost regions of the globe.

Since United Tech generates more than half its revenue outside the U.S., it should continue to see healthy results, even if the U.S. economy remains sluggish.

Technically, UTX looks ready to once again lift off. During the October 4th trading week, the stock broke its intermediate downtrend off its April 2010 high of $76.18.



Currently nearing its upper Bollinger band intersecting at $73.50, UTX is on the verge of penetrating a small shelf of resistance near $73. Important resistance lies at $76.18. But if the stock can break this level, it could again challenge its 2007 high of $84.48.

The indicators are bullish. MACD recently gave a buy signal, which was significant, since it occurred near the zero mark. The MACD histogram is building in positive territory.

In April, the major relative strength index (RSI) uptrend line broke and an intermediate downtrend line began forming. However in September, this downtrend line was also pierced. At 58.6 and rising, RSI is currently in an uptrend and above the key 50 juncture, but is not yet near overbought territory.

Stochastics is on a buy signal and rising, but the stock is not yet overbought.

Fundamentally, United Tech has a robust revenue and earnings outlook.

In late July, the industrial equipment manufacturer reported better-than-expected second-quarter results, with revenue increasing for the first time since the fourth quarter of 2008.

Second-quarter sales edged up +5.3% to $13.9 billion, from $13.2 billion in the year-ago quarter. According to Thomson Reuters, analysts projected revenue of only $13.6 billion.

On October 20th, the company will report third-quarter results. Analysts expect revenue to increase +3.7% to $13.9 billion, from $13.4 billion in the year-ago period. With demand for industrial equipment expected to continue rising, analysts project full 2010 year revenue will inch up +3% to $54.5, compared to $52.9 billion last year. By 2011, analysts estimate revenue will grow a further +4.8% to $57.1 billion.

The company’s earnings outlook is also positive.

In the second-quarter, earnings increased +14.3% to $1.20 per share, from $1.05 in the year-ago quarter. Analysts expected earnings of $1.16.

With an expected rise in demand for industrial equipment, analysts expect United Technology’s third-quarter earnings to increase +12.3% to $1.28 per share from $1.14 per share in the year-ago quarter.

The company also plans to buy back $2 billion of shares in 2010, up from its previous target of $1.5 billion. That buyback should help put a floor under the share price.

UTX also pays a 2.3% annual dividend ($1.70/$72.91). And as I said earlier, the company has consistently paid a dividend for 74 years.

Action to Take –> Based on the company’s strong growth outlook and solid technicals, traders should go long on United Technologies. My recommended stop-loss is $63.57, just below important historical support and the intersection of the lower Bollinger band. My target is $84.48, the stock’s 2007 high.

Based on Friday’s closing price of $72.91, the potential profit on this trade is +15.8%.