October 14, 2021

Will Buyers Jump into the Pullback in Johnson & Johnson (JNJ)?

 Got a quick technical setup to check out on Johnson & Johnson (JNJ) ahead of potential catalysts that could get the stock moving in no time. Will the recent pullback draw in the longer-term bulls or will the bears be able to keep the momentum going?

Will Buyers Jump into the Pullback in Johnson & Johnson (JNJ)?

We’ve got a textbook uptrend hitting the top of the longer-term watchlist, this time in Johnson & Johnson (JNJ) for all of our CFD and equity trader friends out there. On the weekly chart above, we can see JNJ has been grinding higher over the past two years, dipping to $109 during the 2020 pandemic lows before benefitting from the massive liquidity pump from central banks that’s sent all asset prices higher since then. There was a bit of resistance in 2020 around the $155 handle, which eventually broke in early 2021, likely on the back of bullish sentiment in the healthcare sector as we saw covid-19 vaccines being distributed from companies like JNJ. 

JNJ continued the rally into September, where we finally saw the bulls lose control, more likely on a broad shift in the overall market sentiment as inflation fears and bond yieldsgrew, as well as rising taper speculation among traders. After topping out a smidge under the $180 handle, JNJ has fallen over 12% to nearly retest both the broken major resistance area around $155, as well the rising ‘lows’ pattern marked with the trendline in the chart above. So what now?

Well, for longer-term investors it makes sense to view this as a potential buying opportunity at better prices if you believe in owning a part of a mega huge health care company ($420B market cap and 134K employees), that’s only getting bigger as it grew its earnings 49% in 2021 to $6B, and grew its sales by 27% to $23B in Q2 2021.

And at these price levels and chart setup, there is a pretty clear price invalidation area (below $155 and the rising trendline) to watch, making it easier to put together a low risk plan and to make the decision easier to cut risk if the bears continue to dominate.

But for now, we’d stay in watch mode to see what we get from a couple of potential short-term catalysts: first the FDA’s upcoming decision on recommending JNJ covid-19 booster shots this Friday, and then Johnson & Johnson earnings release next week. Both of these events are likely to get short-term volatility going for JNJ, and we’d like to see how that plays out before considering a move on the long-term technical setup discussed today.

What do you guys think? Is the pullback overdone on JNJ? Will investors jump back in or will the bears break the clear bullish trend?