Put a Band Aid on the Market

special-sale

With the market ‘crashing’ (down almost 3 points on the S&P 500 ETF, $SPY) the rhetoric from the bearish side is heating up. They may have their way finally, but I am not yet convinced. So as the modest pullback continues I am looking for candidates to buy on the dip. One that stuck out Wednesday was Johnson & Johnson, $JNJ.

jnj

It was hammered, down over 2.3% as the S&P was off just over 1.4%. That is a lot for a company of its size to outperform to the downside. The chart above though tells me there may be an opportunity soon to take advantage of that pullback. The two triangles trace out a bearish Shark harmonic that completed about a week ago. The trigger for the bearish break came on September 25th and it has moved lower since. The Shark pattern targets a retracement of the pattern by 61.8%. That is to 102.56. This is also just below the 50 and 100 day SMA’s. This may be a good area between 102.56 and 103.60 to start a position for the long term in the stock. As it falls the RSI is at the edge of the bullish zone. If this area fails the pattern calls for a full retracement to the 98.80 area at the 200 day SMA. Keep in mind that some of the pain from the 102.50 to 98.80 are can also be buffeted by the 2.80% dividend yield. Perhaps a half position at 102.5 and then add October 102/100 1×2 Put Spreads for a credit to both protect the position and possibly add to it at 98. The upside? Well the Point and Figure Price Objective is to at least 125.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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