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TECHNICAL ANALYSIS


Honeywell International Approaching Key Support

01/07/05 08:03:31 AM
by Kevin Hopson

A confluence of support at slightly lower levels should keep Honeywell shareholders in the game for the time being.

Security:   HON
Position:   Hold

Honeywell International (HON) has been trading sideways for the past two months. If Honeywell is going to avoid a breakdown, the stock will have to find support around December's low, which is quickly coming into play. Though Honeywell has been bouncing off the red median line recently, the stock could drift lower for a couple of reasons. For one thing, the median line is sloping downward at a sharp angle, meaning that support here is less likely to create a rally. In addition, prices have been hugging the median line. When this occurs, support along the median line tends to weaken.

Fortunately for the stock, there is a nice confluence of support at slightly lower levels. For example, note how the blue median line -- which acted as support in December -- is converging around the $33.60 level. Just to note, the blue pitchfork is a modified pitchfork, meaning that the July high was not used as the first pivot point. Instead, I used the halfway point between the July high and the August low as the starting point.

Figure 1: Honeywell. If Honeywell is going to avoid a breakdown, the stock will have to find support around December's low, which is quickly coming into play.
Graphic provided by: StockCharts.com.
 
Meanwhile, the median line of the black pitchfork (another modified pitchfork) comes into play around the $33.80 level. If that is not sufficient, the 61.8% retracement from the October to December rally ($33.70) resides in the middle of these two median lines. In other words, Honeywell should find significant support in the $33.60 to $33.80 range.

This means that a breach of December's low will not necessarily lead to a breakdown. Instead, prices will have to breach support in the $33.60 to $33.80 range for a breakdown to be confirmed. As a result, I would keep a close eye on these price levels in the near term. If $33.60 is eventually taken out, look for a further pullback to the $32.40 to $32.80 range, which is the site of the bottom red parallel line and the bottom green parallel line. In the meantime, I would continue to hold.



Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
E-mail address: hopson_1@yahoo.com

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Date: 01/08/05Rank: 3Comment: 
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