Don't Ignore This Chart!

Using The SCTR With Johnson & Johnson (JNJ)


JNJ is one behemoth of a Healthcare company. It dominates in so many areas. Recently are the big cap healthcare companies have been out of favor. Usually, I like to look for strong stocks getting stronger. However, when some large caps give you a big pullback, it can be a timely place to look at the stock. Today, JNJ looks interesting.

I plotted two lines on the SCTR. One at 25 and one at 75. The reason is that JNJ rarely drops down below 25% and it usually is a great buying opportunity for the stock. Now that it looks to be headed back above 25, that can be a valuable entry into a great company. Two things make the entry valuable. JNJ is moving back above the 40 WMA which is usually a good sign for long term investors. If you are worried about the speed of the market recently, some investment professionals are selling their winners and looking for the next stock to ride. JNJ hits their radar for being near the low end of its relative performance. In 2015, the SCTR was improving while the JNJ stock was going lower. That is because the rest of the market was going down faster than JNJ. The last 4 of 5 times have led JNJ higher as soon as its mojo started to improve. 

JNJ doesn't spend a lot of time below the 40 WMA which is the equivalent of the 200 DMA. The price action is improving above the 200 DMA which is usually a part of a long only investing strategy.  It's MACD is returning to the centre line and the histogram is improving. The risk reward for JNJ is pretty good here with a tight stop. 

If your portfolio needs a bandaid, this just might be the solution.

Good trading,
Greg Schnell, CMT, MFTA.

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More
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