Trading Johnson & Johnson Once It Reports Earnings

Johnson & Johnson made an explosive move off its March lows but has been trading lower since topping out in April. Let's look at the charts for the stock.
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It’s been all about the banks so far this week. That’s about to change on Thursday when Johnson & Johnson  (JNJ) - Get Report reports earnings before the stock market opens.

Investors will be keying into several things from Johnson & Johnson. They’ll want to know how its coronavirus vaccine is coming along, as well as how business has gone with so much volatility plaguing the economy.

So far, the stock is the very definition of a “V-shaped recovery.”

The stock plunged 29% from peak to trough in 34 trading sessions, before rebounding by 44% from the low in just 22 trading sessions. Incidentally, J&J hit new all-time highs amid that bounce.

Since then though shares have cooled off. Let’s look at the charts since there are a few key areas for both bulls and bears to focus on after the report.

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Trading Johnson & Johnson Stock

Daily chart of Johnson & Johnson stock.

Daily chart of Johnson & Johnson stock.

Many stocks were hitting post-coronavirus highs in May and June. By then, Johnson & Johnson had peaked almost two months prior. That came after better-than-expected earnings propelled shares higher in mid-April — can the event be a catalyst now too?

After topping out, shares fell into a downward channel, chopping lower until this week. Up about 5% so far this week, Johnson & Johnson stock is breaking out of its channel. Further, the stock is reclaiming its 50-day moving average.

Now moving higher, investors find the stock in a tough spot — at least, as far as trading it goes. Shares are just 4.5% below the prior 2020 highs, but have also recently broken out.

On the upside, I want to see J&J stock clear the $150 to $152.50 area, putting the highs near $156 in play. If shares clear this mark, it puts the 123.6% extension in play near $163.

On the downside, I’d love to see $145 hold as support. There Johnson & Johnson stock finds its 50-day moving average and the backside of prior downtrend resistance. For this area of prior resistance to hold as support would be a bullish development even though it would mean the stock is declining in its post-earnings reaction.

Below this area puts the 20-day moving average in play near $142.50. More notably though, it puts the 200-day moving average in play near $140, followed by channel support near $135.