Honeywell Aerospace separated from its parent conglomerate in June. First earnings report as an independent company: guidance slashed across the board. The company needed exactly one quarter to prove it couldn't make it on its own.
Analysts are downgrading. Retail traders who bought the spinoff are now holding shares in a company that exists solely to disappoint them on a quarterly basis. The technical setup doesn't care. The chart knew this was coming three weeks ago when it put in a lower high and rolled over like a dog that ate chocolate.
Some poor bastard definitely bought this on day one of the separation because his broker sent him an email explaining how spinoffs create shareholder value. He read that email on his phone while sitting in traffic. Clicked buy. Now he's down 18% and googling "how long should I hold a stock that's dying." The answer is zero days. He will hold for eighteen months.
The fundamental story here is that Honeywell spent decades using its aerospace division to smooth out earnings from thermostats and factory equipment. Now the aerospace unit is alone. Turns out when you remove the stabilizing force of boring industrial products, you get a company that misses guidance immediately. Shockingly, the market did not price this in.
Support is at $32. It will not hold. The next level is $28, which also will not hold, because this is a falling knife and retail traders are standing below it with their hands out like they're trying to catch a bouquet at a wedding. They will catch it. It will hurt.
The downgrade is correct but irrelevant. The stock was already broken before the analyst typed the first word of his report. By the time you read the downgrade, the move is over. You're not trading information anymore. You're just funding someone else's exit liquidity while pretending CNBC gave you an edge.
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