Johnson & Johnson Sees Possible Bullish Chart Ahead of EarningsJohnson & Johnson NYSE:JNJ will report Q4 numbers next Wednesday (Jan. 22) at a time when the medical company’s stock has been under the weather, falling back some 14% since early September even as the S&P 500 gained about 7%. What does JNJ’s technical and fundamental analysis say could happen from here?
Let’s look:
Johnson & Johnson’s Fundamental Analysis
The Street is looking for JNJ to report $2.04 in adjusted Q4 earnings per share on $22.5 billion in revenue. That would reflect about 4.9% in sales growth year over year, but also show a 10.9% drop in adjusted EPS from the $2.29 that Johnson & Johnson saw in Q4 2023.
Of the 15 sell-side analysts that I know of who follow JNJ, all 15 have revised their Q4 estimates lower since the quarter began.
But the company also had some interesting news this week. On Monday, Johnson & Johnson announced the acquisition of biopharma firm Intra-Cellular Therapies NASDAQ:ITCI for $14.6 billion, or a cool $132 per share in an all-cash deal.
The idea is to strengthen JNJ's neurosciences portfolio. At least the firm recognizes that either you grow organically or you “buy” growth. Doing nothing isn’t usually a good solution.
Intra-Cellular Therapies brings with it a drug called Caplyta, an oral treatment for schizophrenia.
Caplyta generated more than $175 million in sales for Q3, up from less than $126 million in the same quarter one year earlier.
ITCI isn’t a cash-flow beast by any stretch, but the firm has no debt on the balance sheet. So, JNJ is buying potential, not somebody else's financial problems. In fact, Intra-Cellular had more than $1 billion in cash on hand as of Sept. 30.
Additionally, ITCI has a promising candidate (ITI-128) currently in Phase 2 testing as a potential therapy for generalized anxiety disorder and Alzheimer's-related psychosis.
Johnson & Johnson’s Technical Analysis
Now let’s look at Johnson & Johnson’s chart going back six months:
Readers will see that the stock has been very responsive since the summer to traditional technical analysis.
JNJ developed a so-called “rising wedge” from July into September, as denoted by green shading at the chart’s left. That’s historically a pattern of bearish reversal.
The rising wedge ultimately culminated in a “double-top” pattern of bearish reversal, which apexed in both early and mid-September (marked with two red boxes in the above chart).
Lo and behold, the stock became mired in a downward trend after that.
However, JNJ has recently developed a “falling wedge,” denoted by the red box at right. That’s usually a pattern of bullish reversal.
Readers will also note that Johnson & Johnson’s most recent low occurred right around the time the stock suffered a "death cross.”
That’s when a stock’s 50-day Simple Moving Average (Or “SMA,” marked with a blue line) crosses below its 200-day SMA (the red line). This often causes a negative algorithmic reaction that leads to further bearish behavior.
I don't know when (or if) the falling-wedge pattern’s bullishness will come to fruition, but I do know that Johnson & Johnson could definitely use a positive catalyst.
Next week’s Q4 earnings could provide that, as CEO Joaquin Duato will get a chance to talk up the Intra-Cellular Therapies acquisition during the company’s earnings call.
I also know that JNJ is pressuring its 21-day Exponential Moving Average (or “EMA,” marked with a green line) from below. That could put swing traders on alert.
Such activity could put the 50-day SMA in play if there’s a rebound. That could serve as the stock’s upside pivot point.
As for other technical indicators, Johnson & Johnson’s Relative Strength Index (the gray line at the chart’s top) looks like it’s improving.
However, the stock’s daily Moving Average Convergence Divergence indicator (or “MACD”) shows that both the 12-day EMA (the black line at the chart’s bottom) and the 26-day EMA (the gold line) remain mired in negative territory.
Still, the histogram of JNJ’s 9-day EMA (the blue bars at bottom) has recently found its way into positive territory.
(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle” had no position in JNJ at the time of writing this column.)
This article discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. Moomoo and its affiliates make no representation or warranty as to the article's adequacy, completeness, accuracy or timeliness for any particular purpose of the above content. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services on Moomoo are offered by Moomoo Financial Inc., Member FINRA/SIPC.
TradingView is an independent third party not affiliated with Moomoo Financial Inc., Moomoo Technologies Inc., or its affiliates. Moomoo Financial Inc. and its affiliates do not endorse, represent or warrant the completeness and accuracy of the data and information available on the TradingView platform and are not responsible for any services provided by the third-party platform.
