Johnson & Johnson (JNJ) is another company that Jim Cramer put in his new GLOOM index last night on his Mad Money show on CNBC. Indeed, JNJ has been declining the past five months. Most of the chart and indicators on JNJ are still bearish and will probably weigh down this new GLOOM Index until a new base is formed. Let's check out the charts and indicators to see if there is any improvement down the road.
In this updated daily bar chart of JNJ, below, we have more bearish signals than bullish ones. JNJ broke down below the rising 50-day moving average line in late January and the slope of the line quickly turned negative. JNJ is still below the declining 50-day line. The slope of the 200-day line turned bearish in late March and we can see a bearish dead cross of the 50-day and 200-day averages in the middle of March. The On-Balance-Volume (OBV) line has been weak since the middle of April but shows some improvement this month. In the lower panel is the 12-day price momentum study which shows that downside momentum has been slowing. This is a bullish divergence but we also know that it is an imprecise timing tool.
In this weekly bar chart of JNJ, below, we can see that prices are pointed down and below the declining 40-week moving average line. The weekly OBV line has been losing ground (bearish) all calendar year. The weekly Moving Average Convergence Divergence (MACD) oscillator is well below the zero line and has narrowed in recent weeks but it has yet to cross to the upside for a cover shorts buy signal.
In this Point and Figure chart of JNJ, below, we can see a bearish pattern with a potential downside price target of around $111. A rally to $127.44 would improve this chart.
Bottom line: JNJ is still in a gloomy downtrend and weighing on the GLOOM Index. The Point and Figure chart suggests that prices could decline further but a bullish divergence from momentum promises a recovery. I think JNJ needs some sideways trading with a stronger OBV line.