Johnson & Johnson (JNJ) is an iconic and diverse health care giant and a component of the Dow Jones Industrial Average. The stock plunged by 18.7% from its all-time intraday high of $148.99 on Dec. 4 to its Christmas low of $121.00 on Dec. 20. Thursday's close at $129.99 flat so far in 2019, and the stock is a laggard with a gain of just 6.7% since the Dec. 24 low.
The stock is not cheap, with a P/E ratio of 226.87 and a dividend yield of 2.81% according to Macrotrends. Johnson & Johnson is below its 200-day simple moving average at $132.16 and well below risky levels. In addition, the weekly chart is negative, but the stock is above its "reversion to the mean" at $120.16.
Johnson & Johnson is set to report earnings on Tuesday, Jan. 22, before the opening bell. Analysts expect the company to report fourth quarter earnings per share (EPS) of $1.95. The company almost always beats EPS estimates, but this trend has not helped the stock recently given the $4.69 billion law suit related to talcum powder. Investors should therefore focus on what should be solid results from its pharma and medical devices segments.
The daily chart for Johnson & Johnson
The daily chart shows that Johnson & Johnson stock is trading below its 200-day simple moving average at $132.16. Based upon the close of $129.05 on Dec. 31, my proprietary analytics generated four risky levels above the market, which are the horizontal lines. My semiannual and monthly risky levels are $137.24 and $138.25, respectively, and above are my quarterly and annual risky levels at $145.31 and $148.73, respectively. This is a clear set-up to sell strength.
The weekly chart for Johnson & Johnson
The weekly chart for Johnson & Johnson is negative, with the stock below its five-week modified moving average of $132.60. The stock is above its 200-week simple moving average, or "reversion to the mean," at $120.16, which is the level at which to buy. The 12 x 3 x 3 weekly slow stochastic reading is projected to slip to 31.03 this week, down from 32.45 on Jan. 11.
Given these charts and analysis, my trading strategy is to buy Johnson & Johnson shares on weakness to the 200-week simple moving average at $120.16 and to reduce holdings on strength to my semiannual and monthly risky levels of $137.24 and $138.25, respectively.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.