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The monthly chart of Johnson and Johnson (JNJ) shows a gradual uptrend for the past two years as the monthly downtrend, line a, was overcome last June.
- JNJ has rallied this week and is currently trading above its quarterly pivot level at $71.06 (blue line on chart).
- There is next resistance at $71.60 and then at $72.74, which was the high in October as well as 2007.
- The monthly relative performance shows a potential bottoming formation as the long-term downtrend, line b, is being tested.
- The RS line shows good support at line c.
- The monthly on-balance volume (OBV) has been much stronger than prices for the past few years after breaking through resistance at line d.
- The breakout level in the OBV was tested in 2012 before the OBV again surged higher.
- There is minor support now at $69.80-$70.20 and then at $69. More important support at $67.80-$68.50.
Verizon Communications Inc. (VZ) spiked above the monthly resistance, line f, in September as it hit a high of $48.77 before the sellers took over.
- VZ was hit hard in October along with most of the high-dividend stocks as it had a low of $40.51. This was a decline of 16.9% from the highs.
- VZ is currently trading above the quarterly pivot at $44.18.
- The converging support, lines g and h, was tested on the recent correction.
- The relative performance or RS line is now testing its rising WMA with more important support at the uptrend, line j.
- The relative performance has long-term resistance at line i.
- The monthly OBV broke through its four-year downtrend, line j, in late 2011.
- The OBV is still acting strong.
- There is initial support now at $43-$43.60 and then at $42.50.
What it Means: The monthly OBV analysis of all four of these stocks indicates they have been undergoing long-term accumulation. All four have good yields, especially when compared to the low yields of Treasury securities. The risk can be well controlled on these stocks if purchases are made at lower levels.
How to Profit: For Wal-Mart Stores Inc. (WMT), go 50% long at $68.34 and 50% long at $67.72, with a stop at $64.36 (risk of approx. 5.4%).
Prior to Wednesday’s opening, I recommended Johnson and Johnson (JNJ), but the buy levels were not hit. Here are the new buy levels. For Johnson and Johnson (JNJ), go 50% long at $70.24 and 50% long at $69.82, with a stop at $67.66 (risk of approx. 3.2%).
For Verizon Communications Inc. (VZ), go 50% long at $43.64 and 50% long at $43.22 with a stop at $41.87 (risk of approx. 3.6%).
Portfolio Update: As per last month’s column, you should be 50% long Coca Cola Co. (KO) at $37.16 and 50% long at $36.70. Use a stop now at $35.34.
To see the current Charts in Play portfolio, click here.