Johnson & Johnson (NYSE:JNJ) started a downward trend just as the month of August started. This significant stock price movement pushed shares lower over the past 6 weeks. The multinational company started to regain its strength earlier in the month of September after retracing almost all of the gains in the aftermath of Britain’s exit from the European Union.
After the last two days of positive price movement, the decline may have finally come to an end, placing Johnson & Johnson on track for a new bullish trend.
During the Brexit selling wave, the JNJ stock incurred very little damage. In fact, on the 27th of June when the Dow Jones Industrial Average ended the session with a loss of 260 points, the company’s stock closed in 0.8 percent higher. In the following day, the JNJ stock hit fresh 2016 highs as a buying wave which spanned 4 days resulted in an exceptional breakout. The shares of the multinational firm moved steadily to the upside until the middle of July as the $126 level was hit.
Johnson & Johnson stalled at this area and after hovering just below this strong resistance for 2 and a half weeks, a significant decline started. Now that this phase seems to have ended, market players will be rewarded with very low-risk entry opportunity.
The narrow basing action which took place over the previous two weeks has confirmed the $117 level as a strong support level. This region includes the June 28 breakout and the low for September.
In the near term, bulls should regard JNJ stock as a low-risk buy between the $117 and $119 levels. We believe that a close below the $116 mark would signal that more basing will be required before the decline from the July high has run its course.
The $121 region will offer a significant hurdle, but once this area is completely broken out, the JNJ stock should have sufficient momentum to surpass its 50-day moving average.