Johnson & Johnson: More Downside Is Expected Before Resuming The Rally

Since the crash of March 2020, all stocks have tried to recover what they lost, and Johnson & Johnson (JNJ) was no exception. Johnson & Johnson did not only recover the loss, but it also reached historic highs. In those days, we were looking for an entry in the 155.33–156.93 area to reach a target above $176.00 dollars.

JNJ March 2021: Daily Chart

In this old chart, JNJ had a strong recovery in 3 swings. The wave ((3)) had its highest point at the 173.69 area rejected by the market in a double correction structure, and it overlapped the wave ((1)) zone to end the wave ((4)). We were expecting to see one more swing higher to complete wave ((5)) as an Ending Diagonal pattern.

JNJ July 2021: Daily Chart  

The share price continued to rise until it reached 172.79, which we called wave (1), where it created a Leading Diagonal (LD) structure. Before that in April, wave 2 (red) dropped to our minimum entry at 156.93 and bounced to complete the LD.

From there, we saw a clear correction, illustrated as a zig-zag wave (2), missing our ideal second entry for a few cents. Additionally, the possible target to complete wave ((5)) came in at the 178.97–187.48 area.

JNJ September 2021: Daily Chart  

The rally continued and we achieved our minimum target at 178.97 from 156.93. It also gave us a 14.04% return, although we were expecting one more swing high to complete the 5-waves-up pattern.

JNJ missed a new high, and the ending diagonal with the structure of '5-3-5-3-5' had to be changed to '3-3-3-3-3,' as you can see in the update. The rejection had been strong enough to give us the conviction that wave II was in progress and that wave I finished at 179.92.

The drop began and we considered an ((A)), ((B)), ((C)) zig-zag correction to complete wave II. Wave ((A)) took the form of an impulse. We needed one more wave that would break around the 162.17 level to reaffirm the idea of the impulse.

JNJ January 2022: Daily Chart  

JNJ kept dropping and completed the impulse as wave ((A)). Then we saw an irregularly flat bounce that we are calling wave ((B)) and as we stay below wave ((B)), we need one more impulse down to at least the 151.00 level to end wave ((C)) and the whole correction as wave II.

We are very near to the invalidation level, and a break of around 173.51 would challenge that. The inclusive wave II could be down with the new low of wave (B). However, we are looking for more downside. As long as it stays below the 179.92 high, the possibility to reach the 151.00 level remains intact.