The Temperature is Rising on Honeywell: Bonus Idea
- Posted by Greg Harmon
- on November 28th, 2016
Here is your Bonus Idea with links to the full Top Ten:
Honeywell, $HON, had only a minor pullback in its stock price at the beginning of the year. It hit a low and found support in late January, before embarking on a 6 month move higher. That culminated in a high in July near 120. Since then it has pulled back, finding support a couple times around 110 and bouncing. In October it gapped lower though, falling more than 5% below its 200 day SMA. Since then it has bounced and moved through the prior resistance and is now near filling the gap down as it consolidates.
A Measured Move higher would give a target to 118.30 as an initial target. But there is also a possible AB=CD pattern that gives a longer term target to about 131.50. The momentum indicators are bullish. The RSI is rising in the bullish zone while the MACD is rising and positive. There is resistance at 114.20 and 117 followed by 119 and then free air to new all-time highs. Support lower comes at 112 and 110 followed by 108. Short interest is low under 1% and the company is expected to report earnings next January 27th.
The options chains show large open interest at the 115 strike in December on the call side, but big open interest at the 110 and 100 puts as well. In January there is large open interest at the 115 call as well, and from 100 to 110 open the put side. In March, the first expiry beyond the next earnings report, open interest is biggest at 115 and 120 on the call side, and then 115 on the put side, but still relatively small.
Honeywell, Ticker: $HON
Trade Idea 1: Buy the stock on a move over 114.25 with a stop at 112.
Trade Idea 2: Buy the stock on a move over 114.25 and add a collar (20 cent credit) comprised of a January 110 Put and a march 120 Covered Call.
Trade Idea 3: Buy the January 105/March 110 bullish Risk Reversal ($2.50).
Trade Idea 4: Buy the January 110/115/120 Seagull (Call Spread Risk Reversal, 42 cents).
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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which stuffed with turkey and shopped out from Black Friday, had traders and investors seeing the equity markets looking strong heading into December.
Elsewhere look for Gold to continue lower while Crude Oil consolidates with a short term bias higher. The US Dollar Index continues to look strong as while US Treasuries are biased lower but may be finding support. The Shanghai Composite continues to look strong and Emerging Markets continue to consolidate in their downtrend.
Volatility looks to remain very low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The SPY looks strong and ready for more while the IWM may be getting overheated and should garner close attention for a possible short term pullback. The QQQ is sitting just under highs and could be the beneficiary of any short term rotation. Use this information as you prepare for the coming week and trad’em well.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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