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5 Huge Trades for a Volatile 2013

Johnson & Johnson

It's been a challenging year for Johnson & Johnson (JNJ - Get Report) -- even though shares of the healthcare product behemoth has seen its shares climb 7.7% since the start of 2012, the S&P has climbed almost twice as much. And now, JNJ could be getting ready to erase some of its already-trailing gains thanks to a double top pattern that's shaping up in shares.

The double top is a pattern that's formed by two swing highs that top out at approximately the same price level. They're separated by a trough, a level that marks the trigger point for this trade. For Johnson & Johnson, that level comes in just above $68; if shares slip below that price, then this trade has triggered, and it's time to be a near-term seller (or a short it). If you're wondering about this pattern's efficacy, just take another look at the AT&T chart we already saw: it was a double top back in October that sent T into the downtrend it's just now recovering from.

When you're looking at any technical setups, it's important to think of them in terms of buyers and sellers. For JNJ, those two tops stalled out at a price where sellers became much more eager to sell shares and take gains than buyers were to buy. And while buyers were wiling to step in and halt the decline just above our $68 level, a print below that line means that increasingly anxious sellers have overpowered them.

This isn't a long-term downside setup for JNJ, but the trading implications are big enough to warrant keeping a close eye on this stock. That's especially true if you're thinking about planning an exit for tax purposes before year-end.
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JNJ $112.75 0.60%
GOOG $698.21 0.75%
GM $31.75 -0.16%
MRK $55.30 0.84%
T $39.10 0.72%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

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