Let's take a quick look at how big pharma stocks have been performing as of late. We will mainly focus on the "elephants" in the room, such as Novartis (NVS) - in green, Johnson & Johnson - in red, Glaxosmithkline (GSK) - in purple and Merck (MRK) - in blue. This compares to the iShares US Healthcare Provider (IHF) - in orange.
We can note that except for Novartis, none of the other players, let alone JNJ, have shown any significant movement.
When we initially placed the trade, JNJ traded at $69.2. That price was just 32 cents below the all-time-high of the decade at $69.52. We were anticipating a multi-year breakout of that level. In order to be certain that it is indeed a true breakout, we decided to wait until JNJ breaks the $69.82 threshold (30 cents higher than the previous ultimate high). This "extra" 30 cents provide us with the certainty that the breakout move is a real one and that JNJ is not likely to retreat to the previous range.
Unfortunately, that did not happen and the trade did not trigger.
One important lesson to learn from this is the utmost importance of waiting for a price confirmation prior to a potential breakout. Had we thrown our "buy" order into the market without waiting for such a confirmation, we would have been seesawed.
In order to avoid allocation of funds to a trade unlikely to evolve, we will cancel our "buy" order for JNJ. There is no reason to wait for over a month to a breakout that has yet to occur.
Additional disclosure: I am still long JNJ