Shares of JNJ are taking out a key overhead trendline today with the help of an upgrade from Jefferies.  The stock is up over 2% on heavy trade pushing shares to the verge of a breakout.  Since late June JNJ has been trading in a narrow consolidation pattern while holding key support near the March highs.  This month the stock began to turn up after the $129.00 area was tested once again.  Today’s gain is JNJ’s ninth straight.

In the near term JNJ investors should take on a more positive view of the action.  JNJ is leaving behind what could develop as a major bottom near the July/September lows.  A clear break past the $137.00 area could spark a powerful new rally leg.  The stock is well below overbought levels and will have plenty of room to run. 

JNJ has near term support in place between $135.70 and $133.30.  This key zone includes the September highs near the upper band and last week’s high near the lower band.  On the downside a close back below $132.00 would indicate more consolidation is ahead before a new rally leg can take hold.

Of note,  JNJ is scheduled to report earnings next week(10/17). 

At time of publication we are long JNJ in most managed accounts.