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Sell Johnson & Johnson on Covid Vaccine News? Look at Support First

Johnson & Johnson shares are falling after releasing data on its Covid-19 vaccine. Let's look at where support sits on the chart.

Friday hasn’t been the best day for Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report, with the stock down 4.1%.

The declines comes after the company released more data about its Covid-19 vaccine.

Johnson & Johnson said it achieved an efficacy rate of 72% in the U.S. and 66% overall in its studies.

That’s below its peers like Pfizer  (PFE) - Get Pfizer Inc. Report and Moderna  (MRNA) - Get Moderna Inc. Report, which achieved efficacy rates near 95%. However, that was before there were so many new strains of the virus.

Still, it won’t stop J&J from filing for emergency use authorization from the Food and Drug Administration as early as next week as it looks to get its vaccine to the public.

While J&J’s efficacy rate is lower, it does do a solid job of reducing severe symptoms and doesn’t have as difficult of a storage situation as some of the other vaccines.

Will the market view it as a positive or continue to see this news as a negative?

Trading Johnson & Johnson

Daily chart of Johnson & Johnson stock.

Daily chart of Johnson & Johnson stock.

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After recovering from its first-quarter 2020 spill, Johnson & Johnson spent the rest of the year chopping between $137 and $155.

It pushed through the top of this range right at the end of the year and broke out in January.

J&J rode its 10-day and 21-day moving averages higher, as well as uptrend support (blue line). Now two of those levels - the 21-day and uptrend support - are stepping in as support on Friday.

Will the support hold?

If so, bulls will look for a quick snap-back rally up to and hopefully through the 10-day moving average. That puts the $168 gap level back in play, then the 138.2% extension and the all-time high up at $173.65.

Should J&J regain its bullish momentum and take out all of these levels, a run up to $182.50 may be in play, where it finds the 161.8% extension.

If support breaks rather than holds, investors could be looking at a very interesting setup. In that scenario, it would put the 50-day moving average in play along with $155, which was the top of its prior range.

If we get a dip into the level, it’s hard not to be interested in Johnson & Johnson stock on the long side. Of course, we’ll have to re-evaluate if and when we get there.

For now though, let’s see if support holds.