Johnson Controls (JCI) jumped sharply on Thursday -- enough to get our attention. Yesterday's rally to a new high for the move up looks like it has legs. Let's check the charts to see how far this might carry.
In this daily chart of JCI, above, we can see how prices bottomed out in January and February on heavy volume, before turning higher. In early March, JCI was strong enough to break above the declining, 50-day Simple Moving Average line, and shortly thereafter, a dip to that average was a buying opportunity.
The On-Balance-Volume (OBV) turned up in February, confirming the rally and showing that buyers had become more aggressive -- with the volume of shares traded being heavier on days when JCI closed higher. In late April, JCI surged above the 200-day moving average line. Then in late May, we saw a bullish, but late, golden cross, as the 50-day average moved above the 200-day line. Prices consolidated their gains in the $40 to $45 area over the past three months, until yesterday's upside breakout. Notice how the OBV line confirmed the strength with its own new high.
In this three-year weekly chart of JCI, above, we can see can see the two-legged decline in 2015. Notice the heavy volume that was traded at the lows in January 2016. When you see heavy volume and a stock does not go down, it means that aggressive selling was met with aggressive buying.
Prices are now above the rising, 40-week moving average line. The weekly OBV line has been zigzagging higher this year. The Moving Average Convergence Divergence (MACD) gave a cover-shorts buy signal at the end of February, and an outright go-long signal as it crossed above the zero line in early June. While there is a little chart resistance in the $46 to $47 area, it looks like JCI can rally towards next resistance, which starts at $50. It will probably take a close below $43 to upset this bullish pattern -- and that is where I would risk to on long positions.
