JNJ , update

jnj jan 2011    diagonal model

Here we have again. Like Colgate Palmolive, MMM and a few others this is a “blue chip” that has weathered the recent financial storms quite well , so far. It is also priced to perfection and having gone up in a clean 5-wave pattern, from 0 to $75, it has nowhere to go but down. The text-book (literally) model of the 5 wave sequence ending in a “diagonal” (read, wedge) is shown beside the chart. The wedge is invariable retraced in full.  Furthermore, a retracement to the 4th wave of precious degree, is normal and has the highest probability, that point is at $35 At around $29 we reach a 61% retracement of the  30+ year bull market, again a very likely event. This stock is a sell.

This is not to say that the stock is not good, that is not the argument. Stock prices simple fluctuate well above and well below what they should be worth. Good stocks may simple be sold because that is where the most money is to be had when in need.

For the sake of completeness, I have added Colgate Palmolive below. Remember that this stock may still have to go up marginally to complete the pattern. In all other respects it is a carbon copy. So is MMM. The charts can be enlarged by clicking on them, then they can be moved around to make comparisons easier.

CL simple