Honda Motor (
may finally be ready to motor forward.
The shares have been in a holding pattern for most of the
year. Though the stock hasn't declined by a large amount, it
cannot seem to garner any positive momentum.
However, that may change soon.
the strong support area near $31 (blue line) in August. Despite a
rocky market and an island territorial feud between Japan and
China that threatened to decrease auto exports, the $31 area has
supported HMC all year. Buyers must be very interested in owning
the stock to support it so well during such a rough time.
Bullish investors have every reason to be optimistic, too. With a
P/E ratio of 12 and a forward P/E ratio of 9.5, the shares are
cheap. Moreover, HMC yields 2.9%.
This chart shows the price of
shares along with an important resistance level to
In addition to the fundamental value of Honda, a recent victory
by Shinzo Abe as Japan's prime minister could pave the way for
future profits. Abe won the election in a landslide on
December 16. Since his campaign focused on reinvigorating Japan's
economy, car manufacturers like Honda stand to profit as policies
that support businesses and consumer spending expand.
Though Honda shares are cheap, the stock still needs to overcome
strong selling pressure at $35 (blue arrows). Sellers rejected
rallies twice at that level during the past six months. Until
buyers can bid the shares above that resistance zone, it's too
risky to assume the stock is ready to begin a major rally.
However, once $35 is broken, HMC should make a quick ride to $40.
Over the next 12 months, the shares may easily hit $48.
Equities mentioned in this article: HMC
Positions held in companies mentioned above: