Revisiting and Updating Our Shanghai Exchange Charts from 10 days ago . . . Shanghai Market has lost 15% in the Past 4 Days

Compare the Shanghai Daily Exchange Charts from 25 May 07 to Today's 4 June 07 Chart

On May 25, I pointed out and asked "The Chinese market closes at 4151.13. In the last 17 years, you can see this market has gone up 4200% . . . is this sustainable for much longer?"

And the answer is an emphatic NO!

Last week, after the Chinese government tripled taxes on trading fees, the Shanghai market saw the bears take over from the bulls.

And today, 4 June 07, the market declined 8.26%.

Overall, in the past four trading sessions, the Shanghai market has lost 15% of its value. You are not seeing things. That's right, 15% of the whole market has vaporized.

Click on the charts. Read the details. See for yourself.

As I asked on one chart, "How low will she go?"

Print out the charts. Clip them into a notebook for future generations to observe and learn what bubble markets look like.

Okay, the above was the chart from 6 trading sessions ago. After today's swan dive off a cliff, here is what the same chart looks like now . . .

And here is the update on the monthly chart. Please read notes on this chart as it explains what the monthly is beginning to portend for July . . .

One more big question: should the Shanghai Market lose 50% or more from its market top, how will that affect world markets? Will we shrug off the losses in China as we have done in the past 4 trading sessions?

Machts nichts, i.e., "It doesn't matter?"

Stay tuned to this board for timely updates . . .

Rock's Stocks: First Official Pick for the Rock Trueblood Watchworld Blog: Johnson and Johnson (NYSE: JNJ)

Strong Buy: Johnson and Johnson (NYSE: JNJ)

Buy Range: $62 to $68 a share.

I am selecting Johnson and Johnson as our very first pick for this blog.

Friday, 1 June 07, Johnson and Johnson shares closed at $63.41 a share.

In a Nutshell, Here are 22 Reasons Why I Recommend You Buy Johnson and Johnson Shares NOW in the $62 to $68 range:

1. The longterm Japanese Candlestick chart of mine shows JNJ shares "reconfirming" a longterm trendline three times in 2007. My charting service, stockcharts.com, only has data going back to 1990. Still the trendline shown (snapped from a start in 1994) is a continuation of a much older trendline starting in 1984 which I snapped on a JNJ Japanese candlestick chart using another charting service. This other charting service allows no "snapshots" of their charts to be cut, pasted or saved to my hardrive. If I could show you the older chart's trendline (23 year old trendline vs. this 13 year old trendline on the chart shown above) you would see the same identical rate of rise of the trendline.
2. Extending my trendline to Jan. 1, 2010, I am looking for JNJ shares to be trading with a base range of $95 to $105 a share. This is approximately a 33% increase over the next 2 1/2 years. Figure in dividend reinvesting, and I am looking for no less than a 40% total return increase in share worth during the next 2 1/2 years.
3. Johnson and Johnson has increased dividends every year for the past 40 years straight. The current dividend is .415 cents per quarter. This dividend was just raised 10.7%, or from .375 cents a share to its current .415 cents a share. (Note: Yahoo data does not go back to 1966 . . . the year JNJ started dividend payments with yearly raises.)
4. Johnson and Johnson is formally positioned in one of the Top 3 performing sectors of all time according to Dr. Jeremy Siegel author of "The Future for Investors": healthcare.
5. The Healthcare sector shall grow dynamically during the next 50 years as America and most of the Western World's population ages more quickly than new babies are born. At this time 76 million Baby Boomers in the USA are just beginning to retire. Also, immigration laws are being designed to add new immigrants to our overall population, increasing a pool of new social security/medicare payers who will also need healthcare and who will help pay for healthcare of retiring Americans with no health plans. Healthcare needs will explode, benefitting Johnson and Johnson in an exponential way during the next 50 years.
6. Johnson and Johnson not only has consumer staples (Splenda, Neutrogena, Bandaids, Tylenol, cotton ear swabs, contact lenses,etc.) but many medical devices and prescription drugs.
7. Johnson and Johnson bought out Pfizer's Consumer Healthcare Brands this past January. The products they've added to their pipeline of Consumer goods with the Pfizer purchase are names we all know: Neosporin, Listerine, and others. These new consumer products are just beginning to generate topline growth and will also filter quickly to the bottom line.
8. Johnson and Johnson recently bought out China's biggest skincare/cosmetics maker, Dabao. This gives JNJ a foothold in over 3000 outlets, many of them second tier Chinese cities and towns where Dabao products are featured. . Dabao products are low to medium priced which will fit nicely with the more expensive Neutrogena products already sold by JNJ
9. Brand name is one of the Top 50 in the world.
10. It is one of the Top Ten Fortune 500 Companies.
11. Forbes Magazine made JNJ one of their Top 5 stocks to buy in 2007.
12. Warren Buffet, one of the greatest investors of all time, has recently upped Berkshire Hathaway's stake in JNJ to 48,665,600 shares. This is almost a doubling of the shares he already owned.
13. Earnings on this giant have increased up a beautiful long straight trendline (for the most part) for over 40 years.
14. People are afraid what will happen to healthcare stocks if Democrats take back control of the White House. However, “From 1948 to February 2006 the stock market has returned 11.95%. Under Republican control the stock market returned 9.53% and under Democratic control the stock market returned 15.26%” - Dr. Jeremy Siegel
15. JNJ is well diversified and has more sales outside the US than anytime in its history. Regardless of what happens with healthcare in the USA, the broad product lines, and the surging Global Economy, will help take up any slack caused by US government controls placed in any healthcare bills in the next decade or so. JNJ is what I call a "global goliath".
16. So great is JNJ, it is one of 30 stocks in the Dow Industrials. Liquidity is never a problem. This is a stronghold for many institutional buyers.
17. The recent most quarterly report shows diluted earnings of $1.17 per share . . . or a 17% gain over same quarter in 2006 with .99 cents earnings. Several acquisitions will dampen earnings in the about to be reported quarter, giving investors a better chance at buying than our official buy in price.
18. Recent weakness in JNJ's share price is probably attributable to negative investors sentiment over recent patent challenges. More notably, Cypher stent sales concerns about risk of blood clots from drug-eluting stents and new competition in stents . . . particularly after Boston Scientific bought out Guidant for a price higher than JNJ was willing to pay. The recent acquisition of Conor Medsystems gives JNJ a next-generation stent that should address many of these concerns. For a net $1.3 billion cash, taking an $807 million charge to 1Q07 earnings for IPR&D. . . There was a snag, however, with Conor's new CoStar stent. JNJ has discontinued sales of it abroad and has quietly stopped its pre-approval use application to the FDA. This will shave a few pennies off the bottom line for the year. Hopefully, this gives investors a little more time to average in their buys of JNJ this year.
19. On 23 May 06, Cordis Corp., the heart device unit of Johnson & Johnson Inc., said it agreed to become the worldwide distributor of a line of bare metal stents made by Israeli medical device maker Medinol.
20. Megatrend: Globabl pharma sales rose 7% last year. JNJ will benefit from their global exposure.
21. Value Line rates JNJ as a 1 for "safety", meaning this is a stock which will hold up well in an major market downturn.
22. Motley Fool's "The BMW Method" board is calling a buy on JNJ (using Mike Klein's charts posted on the highlighted website) based on their method of tracking Compound Annual Growth patterns on logarithmic charts invented by founder Jim "BuildMWell". This is a great mechanical screening tool which I added to my toolbox for Blue Chip Big Cap companies only two years ago. It is eerie how many times one of my longterm charts and one of the BMW method charts scream "Strong Buy" at the same time. My Japanese Candlestick charts led me to BUD, PFE, KO and many others in which the BMW charts were also crying out "STRONG BUY".

Okay, gang, that's 22 Reasons to Buy Johnson and Johnson now.

I hope we have a few more months of sideways or down action in shareprice so that we can all build sizeable holdings in our ports. Once it hits $68, I will throttle back on my purchases as I believe JNJ will then be "off to the races".

Think about the 3 billion new Capitalists unleashed overseas who are buying Johnson and Johnson healthcare products right now. Although individual Chinese investors cannot yet buy American companies, that day is fast approaching. And Johnson and Johnson owns many categories of consumer staples and healthcare products in China (and India) already, so the name will be one of the first to be bought.

One more bonus point to drive home: JNJ is not only a healthcare company . . . it is also a consumer staples company.

And I will remind you again from my blog about Dr. Jeremy Siegel's book showing how stocks outperformed real estate . . . the top 3 performing sectors with dividends reinvested over the past 50 years are:

1. Energy
2. Consumer Staples
3. Healthcare

Hence, in JNJ, we have a very "safe" play which is focused in 2 of the top 3 sectors for share growth when dividends are reinvested every quarter.

As Mr. T sez, "I pity da fool who don't buy Johnson and Johnson here and now and hold that sucka forever."