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Johnson & Johnson Stock Flashing Post-Fed Signal

Last week, the Fed cut interest rates for the second time in the last 60 days. In a study determining the best stocks to own after back-to-back rate cuts, Dow stock Johnson & Johnson (JNJ) stood out as an intriguing option going forward. 

More specifically, Schaeffer's Senior Quantitative Analyst Rocky White looked at individual SPX stocks after the last 10 back-to-back rate cuts. According to White, JNJ averaged a monthly gain of 4.1%, and was higher 80% of the time after two Fed rate cuts in the last 60 days. For context, that's good for second-best among Dow stocks, and third-best among its pharmaceutical sector peers.

At last check, JNJ was trading at $132.51, so a move higher of similar magnitude would put the stock just below $148. The last time Johnson & Johnson stock traded that high was prior to a mid-July bear gap. Since that drop, support has emerged at the $126 level, an area that also caught pullbacks earlier in 2019. A 4.1% pop in the next month would also push the equity close toward its year-over-year breakeven point.

JNJ

The analyst community remains on the fence, and could be swayed by significant price action either way. There are 12 brokerages covering JNJ, and six rate it a tepid "hold," with the other six maintaining "buy" or better ratings. In other words, the door is open for upgrades on the Dow stock.

In the meantime, short-term volatility expectations remain modest. The security's Schaeffer's Volatility Index (SVI) of 18% arrives in the tame 24th percentile of its annual range, indicating that front-month options have been cheaper, from an implied volatility standpoint, only 24% of the time in the last year.