Honeywell International (HON) reported better than expected earnings numbers today and the stock is higher, but the charts and indicators suggest we could see weakness in the weeks ahead.
In this daily bar chart of HON, below, we can see signs of weakness and bearish divergences. Prices are testing the cresting 50-day moving average line similar to the test of the rising line in late May. The rising 200-day line is well below the price action, perhaps too far below.
The On-Balance-Volume (OBV) line has been stalled to weakening the past two months even as prices pushed up to a new high in early July creating a bearish divergence.
In the lower panel is the 12-day price momentum study or indicator which shows lower highs from late April to June to now. These lower momentum peaks tell us that the strength of the rally is fading and that is a bearish divergence when compared to the price action.
In this weekly bar chart of HON, below, we can see that the price of HON is far above the rising 40-week moving average line - I would consider it extended.
The weekly OBV line has moved higher the past year but it has underperformed when compared to prices.
The Moving Average Convergence Divergence (MACD) oscillator is poised for a take profits sell signal.
In this Point and Figure chart of HON, below, we can see a possible upside price target of around $205 but we can also see that a break of $163.43 will be bearish.
Bottom line strategy: Over the past 45 years of being involved with the markets I have found numerous incidents where the fundamental news does not fit with the price action. HON is weakened over the past three months, I would be prepared for a decline in the weeks ahead. Remember that markets are forward looking.
(Honeywell is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells HON? Learn more now.)
