There are plenty of investors that are afraid right now. Whether they fear the impact of the election or a Fed move on interest rates or something else it has led to a lot of money sitting on the sidelines. As a market technician this bearish sentiment with prices at all-time highs is a very bullish signal. Yes I said BULLISH.
So with all that dry powder lying around what should investors do? Well one could buy more powder, like Johnson’s Baby powder. Or better yet, buy Johnson & Johnson (NYSE:JNJ), stock. The chart is compelling for this.
After a long shallow pullback from June 2014 until October 2015, Johnson & Johnson started to move higher. Not a sharp steep move up but a slow steady run higher. That lasted until July this year when it started to digest its move up. Now it looks like the digestion is done and it is ready for the next leg higher.
The chart above shows weekly movement to the upside. It also shows the RSI reversing back higher. That is a bullish sign. And the stock has gone from selling to accumulation again. How far will it go? One view would be to place an AB=CD pattern on the chart which gives a target to about 148 over the next 6 months. A move over 125 would give strong confirmation. Keep a tight stop or small size until then.
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