HON (Friday Close at 56.13)
HON is a stock than has been trading for the past 10 months in a clearly defined trading range between $62 and $52. It is a stock that has not been hit yet with the weakness existing in the stock market but is beginning to show signs of deterioration in the charts since January.
After having made a high in December 31st 2007 at 62.00, HON proceeded to drop and make a new 11-month low three weeks later on January 22nd at 52.05, breaking below the previous 9-month low at 52.88 and showing strong weakness. Two days later HON reported earnings increase of 10% and earnings increase per share of 25% and the stock proceeded to rally aggressively up to a high of 60.76 on February 4th. Since the high at 60.76 was made, each subsequent rally (3 of them) has fallen short of the previous high and now the stock seems to be getting ready to go back down to test the support between $52 and $53 dollars. With the weakness and potential strong downtrend in the indexes resuming, it is possible that HON may be back trying to fulfill the break of support it had started on January 22nd.
Resistance in HON, on a daily closing basis. is strong at 56.98 and major at 59.02. Support is decent at 55.50-55.68, strong at 53.95-54.12, and major at 53.19, all on a daily closing basis as well.
It is important to note that HON broke and closed below the 50-week MA on Friday for the first time since July 2006. Though the sell signal was not confirmed, with a close below the most recent previous low close at 56.04, it does look like the stock is likely to break further should the indexes continue to show weakness.
A break of support at the $53 level projects a drop down to 49.70 where the 100-week MA is currently located. It is also interesting to note that there is a gap that was left unclosed on the way up, between 49.55 and 50.10. That gap will definitely become a magnet as soon as the stock closes below 53.19.
Sales of HON between 56.55 and 56.65 and placing a stop loss at 57.10 on a stop close only basis and having an objective of $50 will offer a risk/reward ratio of a minimum of 5-1. I am using a stop close only basis because of the uncertainty of how the market will react, intra-day, to the FOMC meeting results. If an intra-day stop loss is desired place it at 57.90 but do it on a "mental" basis.
My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).
My name is Tony and I am a chartist. I have been trading for close to 30 years. In the 80's I was a broker/trader/analyst for Merrill Lynch, Dean Witter, and Pru-Bache.
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Weekend Chart Comment on HON
HON has been able to generate a higher weekly close than the previous week for the last couple of weeks. Nonetheless, it has only been able to do it by about 20 points each time and therefore is showing that the short-covering rally is weak. So far, the stock has been unable to rally enough to re-test the previous low weekly close at 54.01. Such a failure seems to suggest strong underlying weakness. On a daily closing basis, though, the previous low close at 53.19 has been tested successfully with a recent high daily close at 52.73. In addition, that high daily close has also been successfully re-tested with a daily close at 52.43. In simple words, the stock has done just about everything it needs to do to the upside to re-test the major break of support seen several weeks ago and now looks like it needs to go back down and find where the strong support is now located. Even within the concept of the stock having found a low when it dropped down to 46.67, it seems likely the stock needs to go back down to at least the 48.43 level in order to give the chart a strong re-test of the previous low. Nonetheless, the recent low at 46.67 was not at a level of previous support and therefore not considered a strong support and is at risk of being taken out easily should the stock turn down. Major support is presently down at 45.35 where the 200-week MA is currently located, as well as a large area of previous congestion. On a daily closing basis, resistance is strong at 52.43 and support is strong at 50.03, a break above or below either of those two levels will likely signal further movement in that direction. With the stock having failed to rally above previous breakdown point, the probabilities favor the downside.
So you stop out today. Sorry for your loss!
" and placing a stop loss at 57.10 on a stop close only basis and having an objective of $50 will offer a risk/reward ratio of a minimum of 5-1. "
I think i'll pass on your trading newsletter! LOL!!
He is one big losser he goes from stock to stock if he is luckey he gets to pick up a few suckers and if he losses he has this argument he is only right %20 of the time you have to try him at least 5 times untill you loos your ass
and dont you like the way he rates his picks this one was a 7.5 can you imagine how the 10 looks like and he calls himself a charist wow
Pete Najarian at OptionsMonster and Fast Trading reported last week that someone had loaded up recently on several thousand OTM APR call options, which you can now view as open interest. The stock has been climbing since.
Your right this stock is heading for the toilet. The big boys are all shorting ,knowing about the case. The only factor is how low will it go. I sold at 56 and will come back when it hits 40.From what I hear that will be as soon as the verdict is received.
Tomorrow is the weekly close and that is always the best indicator for a stock. Unfortunately, the weekly close is only good one day of the week and the intra-week action means nothing to this chart.
Nonetheless, with the weekly close tomorrow there is an important level to watch.
Last week the stock made a new 1-year weekly low close at 54.29. It was considered a break of support as the previous low close was 54.46. Nontheless, a close by just 15 points is not all that indicative and therefore a second close below 54.46 is needed to confirm the break this week. That will be the goal of the bears tomorrow.
As far as the bulls are concerned they just need to defend the 54.46 level in order to hold off a big drop down to the $50 level that would happen if the break is confirmed.
There is no close-by level that would be bullish for the market as a close above 57.74 is needed for the bulls to take control away from the bears.
One additional thing of consequence is that on the weekly charts the 20 week MA is beginning to cross under the 50 week MA and that is normally a sign something definitive and strong is about to happen. Likelihood continues to be to the downside.
A close below 54.46 tomorrow would be quite bearish for HON.
On the daily chart, the 56.00 level, on a daily closing basis, is now taking on the resistance level tag. These resistance keep on coming down and that means downtrend.
HON does not look very healthy right now on the chart.
Here is my weekend update:
HON had the lowest weekly close since Apr07 and looks like it wants to head lower. Even with the strong index rally on Friday, the stock was unable to rally sufficiently from the lows at 53.50 to prevent the break of weekly support at 54.69. A sell signal was generated and if confirmed next week with another close below 54.69 will likely cause the stock to drop down to the 100-week MA at $50. The daily chart did not have a breakdown on Friday as the lowest daily close since Apr07 has been 53.09, nonetheless, it did break below the most recent low close at 55.22 and therefore shows continuation of the recent downtrend the stock has been having. Rallies up to the 55.22 level, on a daily closing basis, are possible but if the stock continues to close below that level, pressure will continue. Should the indexes reach their upside goals on Monday or Tuesday and then start to come down (as I expect they will), HON will likely head lower and confirm the break next Friday.
The price was pushed down hard on Friday because someone decided to sell a lot of stock. The volume was almost 12 million shares, versus a normal volume of around 5 million. They got it sold, but depressed the price. Unless this type of selling continues, I would expect the price to rebound $1-2 over the next two trading days, subject of course to the bias of the general market.
I just sold HON at 56.41 with a stop loss at 57.10 stop close only. My objective is the mid 49's. I am risking about $70 to pick up about $700 per 100 shares. It's a 10-1 risk/reward ratio. Tough to pass up on such a good risk/reward ratio.