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  1. Home
  2. / Investing
  3. / Stocks

Iconic Johnson & Johnson Is Poised for an Upside Breakout

Here's how we would trade the blue chip stock.
By BRUCE KAMICH
Aug 17, 2020 | 10:06 AM EDT
Stocks quotes in this article: JNJ

I grew up not far from the corporate offices of Johnson & Johnson (JNJ) . The parents of many of my high school classmates in the 1960s worked for the company. Decades later when our twins were born (unexpectedly) friends would buy us cases of diaper "seconds"  from the company store -- a real budget saver.

Like millions of others we have used many of the company's products for years. Trying to be objective when looking at JNJ may be a bit of a challenge but let's check out the charts.

In this daily bar chart of JNJ, below, we can see a large "V-bottom" from February into March. The shares recovered very quickly and even notched a slight new high by late April. JNJ has traded to slightly lower the past four months. Prices have crossed below and above the sideways 50-day moving average line and tested the rising 200-day moving average line in late June.

After making a low in March the On-Balance-Volume (OBV) line has moved sideways. A rising OBV would be preferred but a sideways line is at least mirroring the price action. The Moving Average Convergence Divergence (MACD) oscillator has been "hugging" the zero line recently but looks like it can turn upward to a fresh buy signal. 

 
In the weekly bar chart of JNJ, below, we can see that the shares have been in a long-term sideways pattern for at least three years. A strong weekly close above $155 should be an upside breakout. Prices are above the rising 40-week moving average line.
 
The weekly OBV line shows a rise from early 2019. The MACD oscillator looks like it has crossed to the upside for a new outright go long signal. 
 
 
In this daily Point and Figure chart of JNJ, below, we can see a potential upside price target in the $177 area and that a trade at $157.05 will be a new high for the move up and should refresh the uptrend. 
 
 
 
Bottom-line strategy: Traders could go long JNJ or add to longs on JNJ at current levels risking a close below $141 for now. Add to longs on strength above $151 and again above $157. The $177-$185 area is our next upside price target.
 
(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.)
 
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TAGS: Investing | Stocks | Technical Analysis | Health Care Equipment & Services | Healthcare | Life Sciences

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