Feb 1 2013

Trying Times; Will It End In Tears?

As the S&P 500 makes a run at its 2007 high, many stocks have already arrived there. Some big name companies have been making all-time highs, and the uptrends are looking very strong. But is this rally sustainable? Recent surges show strong buying interest, but rarely are such aggressive moves sustainable. Here we look at the possible entry points and danger signals in these high flying stocks.

Johnson & Johnson (NYSE:JNJ) has had a great start to 2013; starting out the near $70 it closed Jan. 29 at $74.41, up about 6%. The stock recently broke out of a triangle pattern, which began in October, providing a target price of $76. Therefore, the stock looks to have a bit more room to go on the upside in the short term. Volume was quite light on the breakout though, so those looking for a better (lower) price in the coming weeks could get it. There are two old resistance levels that should now provide support on pullbacks – approximately $70 and $68. This is likely to provide a better long-term entry point. Watch the trendline that began in 2011; it currently intersects near $64 and a drop below that indicates further downside is likely.