Honeywell Joins the Dow - Is the Stock a Buy?

Honeywell shares are popping on their inclusion in the Dow Jones Industrial Average. Here's a look at the HON charts.
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Honeywell  (HON) - Get Report shares are fading from Tuesday’s highs but remain up more than 3% on the day.

Are earnings driving the move? How about an M&A deal? Nope. Instead, the stock is being included in the Dow Jones Industrial Average, joining Salesforce  (CRM) - Get Report (which reports earnings tonight) and Amgen  (AMGN) - Get Report.

Exiting the Dow are Pfizer  (PFE) - Get Report, Exxon Mobil  (XOM) - Get Report and Raytheon  (RTN) - Get Report.

Honeywell has been coming back strong, now up more than $64 after a beautiful double-bottom at $100 in March.

The slow but sure grind higher has rewarded patient investors, as Honeywell has outperformed the S&P 500 and kept pace with the Nasdaq. And at the same time it has kicked out a 2.25% dividend yield. No wonder The Street’s Jim Cramer has liked this one so much.

Let’s take a closer look at Honeywell as the stock makes multimonth highs.

Honeywell and Salesforce are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells HON or CRM? Learn more now.

Trading Honeywell Stock

Daily chart of Honeywell stock.

Daily chart of Honeywell stock.

I love the look of Honeywell’s chart. 

I like the multiple uptrend support marks in play (blue lines). I like the way the stock is now finding the 200-day moving average as support after it acted as resistance in July.

I like the way the stock took out its June highs and is reclaiming the 78.6% retracement — which was resistance in each of the past two months.

All this price action is very constructive for the bulls, and their patience continues to be rewarded. But where do we go from here?

On the downside, I would love to see the 78.6% retracement hold as support. Below will put a gap-fill in play, as well as the 200-day moving average and uptrend support. 

A test down to this area needs to hold as support but would likely be an attractive buying opportunity. Below would open the door to more downside.

On the upside, the $167 to $168 area has been notable, acting as both support and resistance over the past year. A move over this mark puts the February gap in play up toward $175, followed by a possible test of the all-time highs and resistance near $180.

Given the risk-reward balance, dip buyers would salivate over a mild correction in Honeywell stock, especially if they could buy into support. Otherwise, look for a move over $168 to trigger more upside.