It's been a year since Honeywell (HON) split up, spinning off Garrett Motion (GTX) and Resideo Technologies (REZI) , Jim Cramer told his viewers on Mad Money Friday night. Now that investors have had time to evaluate these new entities, are they worth buying? Cramer said he's got a lot of respect for Honeywell, which is why you never want to be a buyer of what Honeywell is selling.
Garrett Motion is an auto parts company, making turbochargers, parts and software for automakers. Shares debuted at $18 last year but now trade for just over $9. That's because the automakers are struggling, which makes the auto parts business a place you don't want to be.
Resideo should be the opposite. The housing market continues to be strong, so a company that makes climate control and security products should be strong as well. Unfortunately, that's not been the case with Resideo, which has seen its shares plunge 54% for the year.
Cramer said he's still a fan of the very well run Honeywell, adding that the company spun off these two lagging divisions at the perfect time. Let's review these charts of GTX and REZI.
In this daily bar chart of GTX, below, we can see that prices have been in a downtrend from April. Prices are below the declining 50-day moving average line as well as the bearish 200-day line.
The On-Balance-Volume (OBV) line topped out in May and its decline into October tells us that sellers of GTX have been more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator is still below the zero line in bearish or negative territory but it made a higher low in October than September despite prices making a lower low.
This is a bullish divergence could signal the beginning of a reversal. After slightly more than a 50% correction it would not be unusual to find this stock showing some bottoming activity.
In this daily bar chart of REZI, below, we find a much weaker looking picture. Prices are also in a downtrend but here the price gaps in March and October tell us that sellers are more anxious to bail.
REZI is below the declining 50-day moving average line and the bearish 200-day line. The OBV line shows a decline for the past 12 months and the MACD oscillator just turned down for a fresh outright sell signal.
Bottom line strategy: I have to agree with Jim Cramer as the charts of GTX and REZI are just not attractive for purchase. GTX could start to form a bottom pattern soon but that does not warrant a buy recommendation now.