Honda Motor (
appears to be taking a breather before driving to $48.
ChartWatch has been bullish on this Japanese car manufacturer
for nearly a year. In fact,
our most recent
report called for a "quick ride to $40." The shares complied,
cruising 18% higher during the next three months.
The stock remains inexpensive, trading with a forward P/E ratio
of 13. It also comes equipped with a 2.5% yield.
Though I continue to offer a bullish long-term view for HMC, the
shares appear to have hit the brakes in the short term. Buyers
are having trouble overcoming strong selling pressure near $39.
In fact, HMC hasn't been able to overcome that resistance zone
during the last three months, despite the surging Japanese
So it's going to take some monumental news item for HMC to break
out above this zone. A strong showing during earnings season
would help. However, I believe HMC is at least another quarter
away from that blockbuster quarter because of the prior slowdown
in China, turmoil in Asia and the fairly nascent bearish trend in
Despite potential near-term weakness, I don't recommend selling
HMC. In fact, you may want to think about adding more.
This chart shows the price of
shares along with an important price channel to
The $36 area should be an area of support as buyers have been
active at that level numerous times in the past few months. And
it's an area where sellers dominated in much of 2012. Very often
previous resistance zones act as new support zones once they have
So I expect big buyers to exert themselves near $36 and sellers
to apply pressure near $39, compressing the shares in a tight
range for the next several weeks or months (blue arrows).
However, I believe that HMC is a $48 dollar stock - given its 13
forward P/E ratio, the falling yen and a 2.5% yield. So I'd be a
buyer at $36, and wouldn't consider selling that position until
HMC clears at least $45.
Equities mentioned in this article: HMC
Positions held in companies mentioned above: