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No bull!

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We've perhaps been focusing a little bit too much on the historical "bearishness" of September, especially during a midterm election year. But according to the Stock Trader's Almanac, there are some groups of stocks that tend to perform bullish during the month of September.

One stock I'd have my eye on that is part of the Morgan Stanley Consumer Index ($CMR.X) 504.66 -1.41% is shares of Johnson & Johnson (NYSE:JNJ) $54.26 -0.89% on a pullback near $51, stop $49.50, or a break above $56.60, stop $53.50 and a trader's target of $61.06. After all, this consumer products giant currently has a "buy signal" associated with its point and figure chart and relative strength versus the Dow Industrials is strong. The current vertical count is bullish to $76.00.

Johnson & Johnson Chart - Daily Interval

Good traders and investors don't get "tunnel vision" and have their account entirely bullish or bearish. The key to success has always been to trade bullish in strong stocks and trade bearish in weak stocks. Obviously, JNJ is finding resistance at the $56.43 level and most likely is being created by those bulls that stepped up to the plate below $45 locking in some gains at current level. A patient bull that perhaps looks to play a bullish tendency in the Morgan Stanley Consumer Index ($CMR.X) might look for JNJ to pull back near the $50.71 level, then follow a bullish trade with a nice tight stop at $49.50. If the group should catch "fire" to the upside, then a bullish break above the $56.50 level could have the stock breaking above its 200-day MA of $58.25, which would also correlate with a break above the point and figure chart's bearish resistance trend.

Component stock symbols that make up the Morgan Stanley Consumer Index ($CMR.X) are (ABS, ABT, ADP, AIG, BUD, CAG, CCK, CL, DIS, EMR, G, GIS, GWW, IFF, JNJ, KMB, KO, MCD, MDT, MO, MRK, NWL, PEP, PG, SGP, SWY, SYY, WAG, WMT and WYE).

Note: I have not scoured all of the components, but I seriously considered a bullish trade in JNJ back in July at $47, but never pulled the trigger and have been impressed with the stock's performance. Sometimes a stock gives a trader a "second chance" and a pullback near $51 may provide such an opportunity for a good entry point.

As mentioned in the market monitor in recent sessions, the last two days of August (tomorrow and Friday) have been "murderous" five years in a row.

Jeff Bailey
Senior Market Technician
Option Investor


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