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J&J Jumps on Goldman Upgrade

A divergent bottom is in place as well as four-straight monthly lows.
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A Goldman upgrade is giving shares of Johnson & Johnson (JNJ) a nice boost today. Goldman boosted JNJ to Neutral from Sell, citing an improved outlook for the pharmaceutical industry. The positive comments sparked a gap higher open that lifted the stock to fresh monthly highs. JNJ has gained more ground since the bell and is now testing a key overhead trendline the links the August/September highs. 

Earlier this week, JNJ retested a very solid near-term support area. This level held the July, August and September lows and papered to be on the verge of a breakdown this Tuesday following a close below $85.50. The stock held on Wednesday and has been moving higher since. If a new upgrade-inspired rally is about to begin, JNJ is rebounding off of four-straight monthly lows in the $85.50 area. That's a solid floor to say the least.

Johnson & Johnson (JNJ)

Source: TradeStation

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JNJ is set up well for a healthy rally. A divergent bottom is in place as well as four-straight monthly lows. The stock certainly has work to do, but it is headed for a encouraging weekly close. Nearby support is in place at the $87.50 area, while a break below the current October lows of $85.50 should be viewed as an important warning sign. On the upside, I expect the September high, a spike left behind on Sept. 20, to present some resistance. If this level ($90.70) can be cleared and attract a noticeable uptick in volume, JNJ's 52-week highs will get a retest.

I am long the stock and will watching the action next week closely. 

At the time of publication, the author was long JNJ.