Honeywell International (HON) made a falling wedge pattern from January to April but it is now in the process of rallying back to its January peak and maybe higher. Let's take a look at the charts and indicators to see how to position this stock now.
HON was reviewed in early March as it was moving down from its January zenith. At the time I wrote that, "HON is in a medium-term correction and not yet significantly oversold and displaying a bullish divergence to warrant re-approaching the long side just yet. A deeper decline could unfold in the next few weeks with prices testing the $140 area or lower." Looking over a chart today we can see that in April and May HON tested the $140 area. Let's see what is going on with HON now.
In this daily bar chart of HON, below, we can see that after two tests of the $140 level HON has firmed up above the rising 200-day moving average line and the now rising 50-day line. The 50-day average line is close to crossing above the 200-day line for what is commonly called a golden cross. Many technical analysts consider the golden cross a late but a bullish signal that can be successful in trending markets. The daily On-Balance-Volume (OBV) shows an interesting pattern. It has been rising the past twelve months but it also does not show any meaningful weakness when prices corrected from February to early May. This tells me that prices fell "of their own weight" and longs did not really liquidate their positions. The trend-following Moving Average Convergence Divergence (MACD) oscillator moved below the zero line in February signal a sell and moved above the line in May for a buy.
In this weekly bar chart of HON, below, we can see some positive developments since March. Prices are back above the rising 40-week moving average line. The weekly OBV line has been steady the past six months and not showing signs of liquidation when prices declined $25 from the peak. The weekly MACD oscillator is crossing to the upside for a new outright go long signal.
In this Point and Figure chart of HON, below, we can see an upside price target of $178.94 being indicated. A trade at $153.96 will strengthen the chart.
Bottom line: If you have been on the sidelines of HON, now is your chance to get in again. HON is showing strength on all three of our charts. Traders could go long here and on strength above $154. The $175-$180 area is my new price target. I would risk below $145 for now.
