Part 5

Johnson & Johnson (JNJ)

Our first stock pick from the XLV for July is Johnson and Johnson.

Company background and financial performance

Founded back in 1886 in the US, Johnson and Johnson (JNJ) is a multinational corporation that develops medical devices, pharmaceuticals, as well as consumer packaged goods.

The company is among the largest 50 corporations in the US by revenue and a global player in the sector it operates.

It has got a credit rating of AAA, making it one of the most valuable US companies out there. Johnson & Johnson has got a well-diversified business, working with over 250 subsidiaries across the globe. Thanks to that it has got an ability to withstand different economic cycles more effectively. It has got one of the largest research and development (R&D) budgets in the pharmaceutical sector.

The company has been reporting strong financial results – steadily growing sales in the past 5 years. The J&J vaccine was a game changer – the one shot vaccine the company produced against COVID-19. JNJ is reporting its earnings on the 21st of July and the expectations are for $2.28 per share, while it reported $1.67 per share in the same quarter last year. The expectations for the upcoming earnings report are quite high and if the company manages to meet or beat expectations that would be seen as a bullish indications for its future share price performance.

Technical analysis

By looking at the daily chart, one could see the strong uptrend that JNJ stock has been trading in since October 2020. In fact, the price bottomed out from the $135 lows back then to reach the $171 highs in the last week of May this year (27%). Since then, we have seen a profit-taking interest that led to a correction on the price, sending the JNJ to the current levels at $164. The daily chart clearly shows the strong support at $162 where lots of buying pressure has been taking place every time the price tested that level since the 8th of June. There have been a few attempts to break that level but it only led to investors actively buying at that point and pushing the price higher afterwards. In other words, we are expecting to see lots of buying pressure once the price tests that strong horizontal support again, which matches with the diagonal support at that point together with the lower Bollinger band that stands at that point as well, matching with the 23.6% Fibonacci retracement that lays there as well. Even if the price manages to break that strong support to the downside, it would be expecting to test the next strong support at $158 where more buying pressure is expected. Either way, the price is likely to bounce from one of those key support levels ahead of the earnings report and we would be looking to add the JNJ stock to our portfolio in order to make high profits to the upside.

Chart: JNJ

We would start buying JNJ stock at the first strong support at $162. Should the price drop further in the short-term before the earnings report, we would be looking to buy more at the next key support at $158. Our initial profit-taking target would be set at $170-$175, followed by the next target at $185-$190 where we would be collecting all profits.

Apple Inc. (APPL)

Our first stock from the SPY for July is Apple Inc.

Company background and financial performance

Founded in 1976 in California, Apple is an American multinational technology company, specialized in consumer electronics, software, and online services. In fact, Apple is the largest technology company in the world measured by revenue with its $275 billion in sales for 2020.

A global leader in the sector it operates. Apple is one of the biggest companies and since January this year it is the world’s most valuable company.

The company has been reporting strong financial results and earnings beat for over 6 years now, beating analysts’ expectations and leading to massive bullish rallies on the stock afterwards.
Apple sold a record number of iPhones last year during the pandemic and beat the previous record that was set three years ago.
Apple is announcing its Q2 earnings on the 29th of July and the expectations are for $0.99 per share, while the leading technology company delivered $0.64 per share for the same quarter of 2020. The company managed to perform extremely well even during the COVID-19 pandemic and further proved that its brand recognition and awareness, as well as its market positioning are rock solid, giving further reasons for investors to look for buying opportunity on the stock and follow the strong uptrend on the price.

Technical analysis

The daily chart of AAPL shows the massive uptrend the stock has been trading in since the market bottomed out in the 2nd part of March 2020. AAPL actually bottomed out from the $52 lows back then to reach the $145 highs in January this year. In other words, the stock almost tripled its value in 9 months, meaning AAPL was one of the best performers during the pandemic. Since the price hit the $145 highs we have seen it trade in a range between the resistance at that level and the $120 lows. The most recent bullish rally from $124, right above the support at $120 has pushed the price towards the current levels at $133 and investors are positioning themselves for the upcoming earnings season and the great expected movements on the AAPL stock especially in case of another earnings beat, which is likely to drive the price around $5-$10 higher after the report.

We would definitely be looking to buy the stock ahead of the report. The first major support is standing at $127, followed by the next strong support at $120. The 50-day moving average also matches with the $127 support mark, which is also where the middle Bollinger band stands as well, giving further bullish indications. Thus, we would wait for a bit of a pullback on the stock and start buying aggressively at those levels.

Chart: AAPL

We would start buying AAPL stock at around $128-$129, right above the $127 support. In case the price drops further in the short term, we would be looking to add more to our buy positions at around $121-$122, just above the next major support at $120. Our initial profit-taking target is set at $139-$142, followed by the next target at $152-$154 where we would be fully cashing in our profits.


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