Johnson & Johnson (JNJ) is a diverse health care giant and a component of the Dow Jones Industrial Average. Tuesday morning before the open, the company reported better-than-expected earnings, extending its winning streak of beating earnings per share (EPS) estimates to 28 consecutive quarters. Today, the stock has rebounded above its monthly and quarterly pivots at $134.79 and $135.38, respectively.
The stock remains in recovery mode after plunging 18.7% from its all-time intraday high of $148.99 set on Dec. 4 to its Christmas Eve low of $121.00 set on Dec. 24. The stock closed Tuesday, Oct. 16, at $132.84, up 2.9% year to date and up 9.8% from its Dec. 24 low.
The stock is reasonably priced with a P/E ratio of 15.10 and a dividend yield of 2.89%, according to Macrotrends. Jonson & Johnson stock is rebounding, as it appears to be close to agreeing to its role in the opioid crisis that's plaguing the country. The dollar value appears to be around $4 billion.
The daily chart for Johnson & Johnson
The daily chart shows the December 2018 plunge for Jonson & Johnson, but the stock put in a bottom at $121.00 on Dec. 24. The close of $129.05 on Dec. 31 was an important input into my proprietary analytics. Based upon my calculations, there is an annual risky level at $148.73. The close of $139.28 at mid-year was another important input to my analytics, and the semiannual risky level is above the chart at $155.92. The close of $129.38 on Sep. 30 was also an input to my analytics, and its monthly pivot for October is $134.79, with a fourth quarter pivot is $135.38.
The weekly chart for Johnson & Johnson
The weekly chart for Johnson & Johnson is positive, with the stock above its five-week modified moving average of $132.18. The stock is also above its 200-week simple moving average, or "reversion to the mean," at $127.19, which was the level at which to buy on weakness during the week of Sep. 27 when the average was $126.72. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 47.96 this week, up from 33.78 on Oct. 11.
Trading strategy: Buy Johnson & Johnson shares on weakness to the 200-week simple moving average at $127.19. Reduce holdings on strength to the annual risky level at $148.73. Its monthly and quarterly pivots are $134.79 and $135.38, respectively.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31, 2018. The original annual level remains in play. The close at the end of June 2019 established new semiannual levels. The semiannual level for the second half of 2019 remains in play. The quarterly level changes after the end of each quarter, so the close on Sept. 30 established the level for the fourth quarter. The close on Sept. 30 also established the monthly level for October, as monthly levels change at the end of each month.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.