Stock of the day: Johnson&Johnson

We’re back with technical analysis on American Stocks! The first company we’ll mention after this short break is Johnson & Johnson.

We analyzed Johnson & Johnson at the end of July (yellow rectangle on the chart), and back then we were on an important resistance where one could think about opening a short position with a great risk to reward ratio. Although it looked good, we also acknowledged the possibility of an upswing, saying:

“As long as we stay below the 173 USD, sellers can try their chance. The price going above will be a NO-NO for any bears and would mean a proper, long-term buy signal.”

So, the thing is, the price broke the resistance and went higher, activating a nice long-term buy signal. This situation gives us two important lessons. The first is, you always need a stop-loss order, especially if you’re planning to short the bull market. The second is, you always need to be open-minded. Sometimes the situation can look negative, but you always need a plan B. You can’t close yourself on only one direction. If the situation is bullish, you buy, if it’s bearish, you sell. I know a lot of traders who only sell, ignoring all the positive signals and vice versa. That’s not a good approach. As you can see, we said that in case of a breakout the buy signal will be clear. And we got this breakout and the price is pushing higher.

There’s no reason to fight with the market, and no reason to keep losing trades running. The price clearly shows us that it wants to go up, and it is going up. Long story short: as long as we are above the 173 USD, the sentiment is positive, and buying J&J seems like a good option.