Johnson & Johnson: Shorts Half Of Trading Vol (Technical Analysis)

Introduction

Johnson & Johnson (NYSE:JNJ) is an American multinational corporation founded in 1886 that develops medical devices, pharmaceuticals, and consumer packaged goods.

While the markets weaken, JNJ has traditionally shown strength in down markets. Today this company had some recent scandals that weakened stock price action over the last few months.

Fundamental strength

It seems that moving into next year; revenue will increase. Net profit should increase as well.

YEARLY ESTIMATES	2022	2023	2024	2025	2026
Revenue	95,188	98,690	101,100	102,630	104,902
Dividend	4.37	–	–	5.19	5.46
Dividend Yield (in %)	2.68 %	2.81 %	2.92 %	3.19 %	3.35 %
EPS	10.09	10.55	10.94	11.24	11.50
P/E Ratio	16.14	15.43	14.88	14.48	14.16
EBIT	30,088	31,991	33,123	33,853	34,671
EBITDA	34,002	36,000	37,539	39,318	43,241
Net Profit	26,771	27,767	28,797	29,387	30,083
Net Profit Adjusted	26,771	27,767	28,797	29,387	30,083

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Source: BusinessInsider

Ratios

All the latest two years’ primary fundamental ratios show strength since 2021 as Johnson & Johnson’s Janssen COVID vaccine rollout helped keep the financial ratios more stable for these years during the pandemic.

Unnamed: 0	2017	2018	2019	2021	2022
Period	FY	FY	FY	FY	FY
Current ratio	2.474	1.474	1.259	1.206	1.348
Quick ratio	2.039	1.082	0.939	0.912	1.037
Cash ratio	0.349	0.193	0.153	0.329	0.320

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Mixed News and Catalyst

Sustainability

Sustainability is set at average performance, which makes JNJ substandard for potential long-term investment. As you know, many institutional investors will be compelled to only invest in outperforming companies over the long run.

Unnamed: 0	Value
Social score	15.79
Peer count	82
Governance score	8.55
Total esg	25.08
Highest controversy	4
ESG performance	AVG_PERF
Percentile	44.38
Peer group	Pharmaceuticals
Environment score	0.74

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Source: Yahoo Finance

Target Pricing

Recent target pricing has increased after a slight decline ($180 down to $160 approximately) in the summer. I question the slightly higher pricing targets but considering the reduction is not as steep as other stocks, it seems there could be a bottoming process taking hold.

Source: BusinessInsider

Recommendation

It seems that there are more sell recommendations from various market analysts. There is also a smaller amount who have decided to go neutral. Therefore, I leave this JNJ stock on hold.

Interval	RECOMMENDATION	BUY	SELL	NEUTRAL
One month	STRONG_SELL	1	17	8
One week	SELL	2	15	9
One day	SELL	2	14	10
4 hours	SELL	6	11	9
1 hour	SELL	3	14	9
15 min	SELL	1	15	10
5 min	SELL	6	12	8
1 min	NEUTRAL	9	7	10

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Source: TradingView

Price vs. Short Volume

Roughly 50% of the total volume traded is short volume. This means there is more neutrality on JNJ, which helps support holding this stock.

Source: StockGrid

Insider Activity

There are no purchases of this stock outside of sales.

It should be highlighted CEO Mongon Thibaut sold off many shares in the summer.

2022-06-09	40,000.00	111,310.87	72.54	Buy	No	Mongon Thibaut
2022-06-09	100.00	111,210.87	173.0	Sell	No	Mongon Thibaut
2022-06-09	174.00	111,036.87	173.0	Sell	No	Mongon Thibaut
2022-06-09	6,600.00	104,436.87	173.0	Sell	No	Mongon Thibaut
2022-06-09	33,126.00	71,310.87	173.0	Sell	No	Mongon Thibaut

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Source: BusinessInsider

Technical Analysis

Fibonacci

Momentum has slowed down after a choppy uptrend that started in May 2020. Fully recovering from this decline might not take long, but when an insider CEO sells, it makes you question what he knows.

Bollinger Bands

The upper and lower bands are tight around the actual JNJ share price. Tight bands mean there is low volatility compared to other stocks.

MACD

Note the lower panel of the yellow MACD line of recent late September activity. It reached the zero line and started to decline again. This suggests that JNJ will continue to drop with little momentum in the price. This could be due to the correlation of the negative performance of more significant US market indices.

Questionable business practices at risk

Two pending issues are worrying about holding JNJ with:

Talcum powder lawsuit

J&J tries to block baby powder lawsuits by 40,000 patients. A court has a question.

Antitrust business practices

J&J, Alcon Pay $75 Million to End Contact Lens Antitrust Case.

Talc Scandal Clouds Investment Attractiveness Of Johnson & Johnson’s Pharma Business.

Could this negative news drag down JNJ over the long run? I think the stock price would have seen a steeper drop if this news event had not occurred.

Will the $5 billion buyback stabilize the price of JNJ? This was announced a few weeks ago.

J&J plans $5B stock buyback program; affirms FY22 outlook.

Conclusion

There are mixed signals within the fundamental analysis, including strengthening revenue and profitability. There is a high risk of acquiring Johnson & Johnson stock with a pending lawsuit and questionable antitrust business activity. Technical research shows that JNJ was not hit negatively compared to other significant stocks. A buyback program may help minimize declines. As with these mixed views, I recommend holding this stock until important positive news and stock reports become positive.