Intermediate Trade: Johnson & Johnson

The Trade: Buy 1 JNJ October 130 call and sell 1 JNJ October 135 call for a 90c debit. 

(JNJ) (Johnson & Johnson) has traded over the past 52 weeks between a low of 119 and a high of 148 (rounded). 

JNJ has a rather impressive market cap that exceeds $325 billion.

JNJ is a Dow Industrial Index stock as well as one of the best of breed of the pharmaceuticals sector.

JNJ trades at a forward PE of just 14.

JNJ is paying an annual dividend yield of 2.6% (84c/share paid quarterly).

Technically, JNJ has a one year stochastic and RSI patterns that are bouncing upward from the low end of their respective range/bottoms. The pattern thus formed now by JNJ is my bullishly biased Washout Pattern. This is a high risk, high reward pattern as it attempts to literally signal a cycle bottom in which to buy the stock forming the pattern. Also, the pattern suggests that little to no resistance remains for a tradable amount of points as many longs have already sold out and the shorts have probably already captured their profits.

The trade tactic I prefer now for JNJ is the bullishly biased, out of the money vertical call spread expiring in October.

The trade is as follows:

Buy 1 JNJ October 130 call and sell 1 JNJ October 135 call for a 90c debit.

The suggested target to close for a gain is a bid of 1.40, and the suggested stop loss target is a bid of 40c.

Best to scale into the position using limit orders.

At the time of publication, Skip Raschke had no position in the securities mentioned.