Posted on July 22, 2019
There comes a time in every profitable business’s life when it has to admit that although the operation is smooth-running and turning a gangbuster profit, the stock valuation is a wee bit stretched.
So it is with Honeywell (NYSE:HON), makers of everything aerospace, robotic and automated.
It’s a fairly straightforward story: the stock shot higher on increased sales and lower taxes, feels optimistic about its second half, and has outperformed the Dow Industrials by a wide margin.
But a look at the charts shows there’s been a wee bit too much heat, and that’s why we’re zeroing in on her today.
We’re going to take a look at both the daily and weekly charts, because, combined, they offer us a blue-sky picture of impending annihilation.
This is the daily –
The technical low-down’s like this –
Whether the change lasts a few weeks or a few months or longer is not known. The downside here is a moving target that we’ll be assessing according to the speed of the move and the volume that accompanies it.
But it don’t look good.
Have a peek now at the weekly chart for Honeybunch –
Last week’s action brought a bearish engulfing pattern (seen in the black blow-up), a devilishly unfriendly indication – particularly when it appears on a weekly chart.
It occurred on better than average volume (in blue), while a MACD cross lower only added to the odds that we’re in for a jitterbug groove of selling.
But we’re not about to make a straight up short call on Honeywell shares, because that’s simply too expensive a proposition.
Instead, we’re going to match her with one of the most beaten up stocks in the most shorted sector of the entire stock universe – the retailers.
The catfish in a halter-top today is Kohl’s (NYSE:KSS), a major department store whose stock has been draggin’ its arse along the river bottom for better than six weeks now and is due for a quick pop higher.
Here’s the chart –
The technicals here show a stock just waiting to fly.
Have a look here –
Kohl’s is among the worst stocks in the worst sector of the market.
We’re facing these two corporate behemoths against one anther in what amounts to a Godzilla vs Rodan cage rematch, and we’ll bet Auntie Mabel’s blue mantelpiece vase that we’re gonna win.
A Jew and His Money recommends you consider buying the KSS January 15th (2021) 52.50 CALL for $6.90 and selling the HON January 15th (2021) 195 CALL for $6.85. Total debit on the trade is $0.05.
With kind regards,
Hugh L. O’Haynew