Johnson & Johnson (JNJ) was reviewed on Friday where I wrote that, "We can't do much about the JNJ products we used over the years but we can take action if we own JNJ and it has fallen below our purchase price or stop loss. Yes, JNJ has survived other unfortunate news events in the past but I would not take that as a good technical reason to hold the stock."
JNJ ended the day and week in a vulnerable position and we are seeing further weakness today.
In this daily bar chart of JNJ, below, we can see the sharp decline of Friday. Prices closed well below the rising 50-day moving average line and tested the rising 200-day line. Prices managed to hold above the 200-day line but JNJ may not be so lucky today with prices indicated to open still lower today.
The daily On-Balance-Volume (OBV) line shows a peak in November and has quickly turned lower telling us that sellers of JNJ have turned aggressive.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has turned sharply and is close to an outright sell signal.
In this weekly bar chart of JNJ, below, we can see that in one week prices retraced more than half of the rally from June. Prices tested the rising 40-week moving average line.
The weekly OBV line has started to turn down with the very heavy trading volume seen last week.
The weekly MACD oscillator has just crossed to the downside for a take profits sell signal on this longer time frame.
In this Point and Figure chart of JNJ, below, we can see the price action from Friday. A downside price target of $114.18 is being projected and this would break the May/June lows.
Bottom line strategy: Investors and traders are voting with their feet and their mouse. JNJ will continue to promote their side of the story but what really matters is the price action. The price action remains weak.
(Johnson & Johnson is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JNJ? Learn more now.)
