JNJ No Tears Gartley Pattern - Exit

JNJ Daily at 9:46am ET

We opened gap up, then started to fill in the gap, but reversed back upward before even filling half the gap. This is quite Bullish, but there's a scheduled testimony by Federal Reserve Chairman Powell at 10:00am ET. That, plus the fact we're struggling a bit at the 50sma, led me to sell our position at 178.22, which is very close to the 179 Target.

At 9:47am ET I Tweeted:

"Sold the GARTLEY pattern near the 179 Target on JNJ. Want to be out before 10am ET Powell testimony."

The .618AD Target at 179.27 was subsequently hit 14:23 ET.

This has been a beautiful textbook trade. Everything worked as it should with very little heat or gray areas.

Summary:

Bought JNJ Aug 175 Call for 3.52 6/14/22

Sold for 7.95 6/23/22

795 - 352 = $443 profit.

795/352 = 226% increase.

443/352 = 126% return.

JNJ No Tears Gartley Pattern - Update 1

JNJ Daily

Great day for our JNJ trade. Got a big candle on big volume with a Close above the 20sma. We bounced off the 50sma, which is a concern, but we've breached it many times before.

We made a higher high and a higher low. The ADX made a bullish cross. Stochastics are still in the mid-range, so no selling pressure from that.

We hit the .5AD level, which is constructive, and we closed in the upper half of today's candle.

The Aug 175 Call option, for which we paid 3.52, had a high today of 7.60. That's better than a double. The voice in my head was quite disappointed when I didn't succumb and sell the option to capture the profits. Especially since I've had trades where I exercised discipline and held out for the target, but the chart reversed the next day and I ended up with much less profit, or worse.

But it looks like we only need one more green candle and we'll hit our 179 target. Plus everything looks bullish for this trade. 

So, bottom line, I held the line and held our position for another 3 points. Looking at the option chain, it looks like between today's stock close 175.74 and our Target 179, we'll get an average Delta of about 60. So, if we hit the Target, the additional profit would be approximately 3.25 * 60% * 100 = $195. 

Seems like holding the position is the smarter trade, albeit the more uncomfortable one.

JNJ No Tears Gartley Pattern

JNJ 6/21/22 Daily Chart

Went long with a JNJ Aug 175 Call on 6/14/2022 for $3.52. At the time, the stock was 168. I entered due to the confluence of the AB/CD, 200sma, and 61.8% Fibonacci retracement. But I got in early, without confirmation. We got that confirmation today, with a close above the 8ema.

Here's what I saw today:

• Bounced off 61.8% Fibonacci of the Gartley pattern
• Bounced off 200sma
• Bounced off AB=CD of the Gartley pattern
• Oversold Stochastics
• ADX Quit the Down Trend
• Trend Kicker candlestick signal
• Close over 8ema

Set the Stop to 167, just below the D point.

Set the Target to 179, just below the .618AD level of the Gartley pattern.

Maximum Risk is the full cost of the Call option, $352. But a better gauge for comparison to other trades is to use the stock value:

Risk = 168 - 167 = $1.

Reward = 179 - 168 = $11.

R:R = 11/1 = 11:1 which is ridiculously great. To be fair, the initial risk wasn't the current Stop. The initial Risk was 168 - 155 = 13, which would represent a bad R:R. 

Let's look at the R:R if I got the 175 Call option at the end of today, but based on stock price. Today's close for JNJ was 173.01:

Risk = 173 - 167 = 6

Reward = 179 - 173 = 6

R:R = 1:1 on this basis, which is considered too low. However, this trade is based on the Gartley pattern, which has a Win Rate of 75%. So, given the Win Rate, 1:1 is acceptable.