HON generated a short-covering rally over the past 2 months from a low of 23.24 up to a high of 36.40 and the 100-day MA. The stock began to drop back and now has a clearly defined chart that is leaning toward further downside. In addition, this is a stock that has not tested the lows on the weekly chart.
HON has built what looks like a head & shoulders formation that if fulfilled would offer a downside objective of 25.35.
On a weekly closing basis, resistance is very strong at 34.65. On a daily closing basis, resistance is strong at 32.80/32.94 and major at 36.04. On a weekly closing basis, support is minor at 31.97, decent at 30.00, decent again at 27.16, and major at 25.38. On a daily closing basis, support is decent an important between 31.21 and 31.52, decent again at $30 from the 50-day MA as well as from a psychological basis, and then nothing until strong support is found at 26.22. Further support is found at 25.42 and major at 23.67.
It must be mentioned that the stock has an open gap 29.26 and 30.07 that will be a magnet if the recent low daily close seen Tuesday at 31.53 is broken. Breaking of that level will also mean a break of the neckline on the head & shoulders formation. Drops down to test the gap, 50-day MA, as well as the psychological support at $30 would then be highly likely. Closure of the gap in conjunction with a close below 30.00 will likely thrust the stock down to its head & shoulders objective as well as intra-day strong support down at 26.00. Such a drop would also mean the stock would be dropping to levels where a successful re-test of the lows would be able to happen.
Resistance of consequence is found starting at 33.10 and all the way up to the 34.00 level, from 3 previous intra-day highs of consequence. In addition, the 100-day MA is currently at 33.50, making that entire area into a resistance level unlikely to get broken unless there is a strong rally in the indexes.
Sales of HON between 33.05 and up to 34.00 and placing a stop loss at 34.10 and having an objective of 25.67 offers a risk/reward ratio of at least 7-1. Drops down to the $30 level have a high probability of happening and if that is all the stock is willing to give, it still offers a 3-1 risk/reward ratio.
My rating on the trade is a 3 (on a scale of 1-5 with the strongest probability rating being 5).
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