Does Johnson & Johnson's Potential Coronavirus Vaccine Make It a Buy?

Johnson & Johnson is making headway with its coronavirus vaccine. Does that make the stock a buy right now? Let's look at the charts.
Publish date:

The stock market opened cautiously higher on Monday but Johnson & Johnson  (JNJ) - Get Report stormed out of the gate, rallying to a quick 6.5% gain on the day.

Driving shares higher was a coronavirus-related announcement that the company has picked a lead candidate for its Covid-19 vaccine. Phase 1 trials should begin no later than September, with emergency doses ready by early 2021.

The company hopes to make a major impact by providing a billion doses of the vaccine and “is committed to bringing an affordable vaccine to the public on a not-for-profit basis for emergency pandemic use."

While this is a positive step, it will do little to help the current situation - short of a morale boost. Still, it’s got shares of J&J moving higher, a stock that is still 15.5% off its 2020 highs.

Does this news make it a buy or should investors wait for better prices? Let’s look at the charts.

Johnson & Johnson is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JNJ? Learn more now.

Trading Johnson & Johnson

Daily chart of Johnson & Johnson stock. 

Daily chart of Johnson & Johnson stock. 

A closer look at Johnson & Johnson stock shows just how rapid the decline has been. Shares went from $153.50 in February to a low of $109 in March, a decline of 28.9%. However, that’s better than the Dow Jones, S&P 500 and a number of individual stocks.

In that regard, J&J investors should find some comfort. They should also sleep better at night with the stock's near-900 basis point outperformance, with the S&P 500 still down 24.3% from its highs.

In any regard, investors want to know where the stock is going - not where it has been.

Shares are approaching a critical juncture. The 100-week moving average is at $131.73, which sits just above the current price. So does prior channel support (blue line) and the 50% retracement of the current peak-to-trough decline (which is also the 52-week range).

If Johnson & Johnson stock can clear this area, it puts the 50-week moving average near $135 in play. Above that and the $140 to $142 breakout area is on the table.

On the downside, bulls will want to see the 200-week moving average hold as support. This level has been significant over the past few weeks and investors will want to see it provide price stability in the coming weeks and months.

Below the 200-week moving average puts the $115 level in play. This mark was support after shares briefly broke below it last week. Should JNJ stock flush below $115, technically speaking the $100 to $102.50 zone is in play.

For now, see if Johnson & Johnson can reclaim the $132 level on the upside, and hold the 200-week moving average on the downside.