The Harmonics in Honeywell

• Posted by Greg Harmon
• on September 29th, 2014

Honeywell, $HON, is a stock with a great pedigree, but having a hard time since reaching a peak over 98 in July. Defense names have been hot, and while this is not a pure defense play it does have that aspect too. So with all the good background why is the stock doing so poorly? Harmonics!

The high in July started a harmonic pattern that completed at point D in the chart above earlier this month. This is a bearish harmonic and you can see the result upon completion was a move lower. In fact the stock gave back 61.8% of the range of the pattern before the last 3 day consolidation. This is the target retracement that the harmonic pattern calls for. What that means is that the current level offers two trade opportunities. The first is that the pattern and retracement have played out and the stock reverses higher. A move over 94 would confirm this and offer a trade to the long side.The second is failure, and a full retracement of the pattern to 90.18. A move under the consolidation area to a new low would confirm a short entry.

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