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
Very creative pairing, O’Haynew. Did you invent it all by yourself?
Nothing will come of it.
Give it time, Dean.
By the way, are you a rector or a proctor?
All the best!