It’s not a pretty picture for Johnson & Johnson (NYSE: JNJ) as the company faces headwinds lately from both a fundamental and a technical picture.
On the fundamental side, the strong dollar is cited to be the reason for the recent decline in sales, as otherwise, sales would have printed a positive number. Company representatives are saying that 4.5% is the negative dollar impact on their sales. Well, taking that into account together with the fact that the Federal Reserve is about to raise rates, so an even stronger dollar to come, it means no good news for JNJ in the medium term.
On the fundamental side, recent news and scandals regarding patents seem to be endless as the company was ordered by regulators to pay settlements in trials in the United States. The amount in the case is not a big one but settles a trend which seems to have no end for the moment.
To the above add the fact that JP Morgan downgraded the stock in early 2015 and this puts a negative view on it.
However, above all, the technical picture ahead of the Fed rate hike seems to be the big problem.
Failing to stay above the 100 level brings into question the 2014 lows around $96.78 as the whole move since then was corrective and implications are that market will break it.
Therefore, current prices at $99.53 seem to be a good opportunity to buy put options with an expiration date that should stretch beyond the Fed March meeting as this should bring levels lower than the 2014 October $96.78.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
