According to Dr. Muriel Jean-Jacques, assistant professor of medicine at Northwestern University, the recently approved Johnson & Johnson vaccine has two game-changing properties.
It's all done, so unlike the already available coronavirus vaccinations from Moderna (NASDAQ 🙂 and Pfizer (NYSE 🙂 / BioNTech (NASDAQ :), no second follow-up shot is needed. Unlike the other two vaccines, the JNJ version does not require specialized refrigeration, such as the extreme freezers required to store the previous vaccines. The Johnson & Johnson (NYSE 🙂 inoculation only requires regular cooling, enabling it to be delivered and administered in both remote and urban locations around the world.
These factors together should be enough to strengthen the foundations of the company. The drug company says it is on track to deliver 4 million doses this week, and another 100 million worldwide in June.
But there are other reasons why the JNJ vaccine could be a driver of the company's stock. It has also been shown to be effective against variants, such as the South African strain, with 64% efficacy in preventing moderate to severe diseases. The vaccination has been shown to be 85% effective against serious diseases and 100% effective in preventing death. Additional studies showed 72% efficacy in the prevention of moderate to severe disease.
It also happens that the delivery of the vaccine coincides with a technical setup that indicates that the supply is about to increase.
Stocks trade on a falling wedge pattern, with both trend lines moving down, with the upper limit falling faster than the lower counterpart. The pattern shows that while sellers agreed to sell at lower and lower levels, buyers held the line and demand steady, relative to the faster-descending upper bound, the seller line.
If the JNJ is expected to fall, why don't buyers match the eagerness of the sellers? If sellers consistently compromise on their selling price, why are buyers constantly willing to pay relatively the same price instead of waiting for the price to drop before investing?
Buyers clearly have a different view of stock than sellers. Why would that be? We assume it's about timing.
The stock is up a whopping 30% in less than 3 months, from the low of October 30th to its all-time high on January 28th. Johnson & Johnson isn't sexy equity like Tesla (NASDAQ 🙂 or Apple (NASDAQ :), which is booming and appealing to young retailers. Rather, it's a traditional blue chip, a classic car that appeals to retirees for its steady dividend, but otherwise tends to move slowly.
The lucky investors who own the stock want to cash in on their profits. They sell their shares and weigh the price. However, buyers who have not invested during that move probably consider the 9% drop from the record high as a buying dip.
Note that the volume has decreased since the record's initial decline, suggesting that this movement is not part of the trend. Also note that the volume has mostly been mirrored to the price action, falling when the price goes up and goes up when the price goes down. This again shows where the motivation is – which is upwards.
Finally, the placement of the falling wedge on the map is significant.
The decline came after breaking the extreme sell-off line since January 15, 2018. Market dynamics tend to push stocks down after a breakthrough upward as the stock is "re-testing" whether its assumed renewed support will hold. This could be by taking a profit through a combination of short and long, as described above. Note that the closing price recently recovered just above the long-term trend line.
Also note that the wedge is not complete until it makes an upward breakthrough. That would show that buyers have absorbed all of the available inventory and are now willing to raise their bids to find new, willing sellers above the pattern, triggering a surging chain reaction.
Trading Strategies
Conservative traders should wait for the price to hit a new high, then buy on the dip after finding support.
After price scales above the Feb. 10, moderate traders would buy $ 168 high, and then wait for a return move for better access, if not further confirmation.
Aggressive traders could continue long after the price hit the February 24th high of $ 164.39, provided they are trading on a preset trading plan.
Here's an example:
Trade Sample
Admission: $ 162
Stop Loss: $ 160
Risk: $ 2
Goal: $ 168
Reward: $ 6
Risk: Reward Ratio: 1: 3
Author's Note: This is a trade example only, which means it is not the only way to approach this trade. Even if the analysis is correct, the sample can be lost. And the analysis can be wrong. We don't know what's going to happen, but we provide statistics. 92% of the falling wedges break upwards (Bulkowski, 2000), but our interpretation of the pattern may be incorrect. Hence, trading with a cohesive plan helps you stay on the side of the statistics. Your budget, timing, and temperament will affect the results of this trade, and you need to tailor a plan to your circumstances. Until you learn how to do that, act small to learn, not to win big or you could lose a lot. Guaranteed. Have fun trading!
