The Longer Term View on Johnson & Johnson

August 25, 2014 12:01 PM

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Johnson & Johnson, $JNJ, had been consolidating in a box for over 2 years when it hit my radar in late 2011 here. It took a little longer to move out of that box but since then has had a spectacular run higher from the mid sixties to over 100. But the run does not seem to be over. In fact there are signs that it may be going through another short term consolidation phase before the next leg higher.

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The chart above shows that the move to 105 in June pulled back and retested the 100 level in July. The price held and is moving back higher. Will it get caught at the falling trend resistance? Maybe. It went ex-dividend Friday though without much of a pullback. The momentum indicators are supportive of upside with a RSI rising and bullish and the MACD leveling after a pullback, and in positive territory. But a longer term trader or investor can deal with that by selling covered call options as it reverses to collect some premium. There is a natural stop just under 100, making the risk $3 less any premium sold. And how far can it go? The Measured Move out of the triangle it is making now would target 110 but the Point and Figure chart is carrying a price objective to at least 125. Who knew selling Band Aids, Listerine and Baby Powder could be so lucrative.

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