Pharma stocks are showing strength. Charts predict this name could break out next
Pharmaceutical stocks have recently separated themselves from the broader market, and the group has become an increasingly important source of leadership within healthcare. Eli Lilly is the bellwether in the space and has already broken out to all-time highs, and that strength is showing up in sector-level proxies like the iShares U.S. Pharmaceuticals ETF (IHE) . With pharma momentum shifting positive in absolute and relative terms, we see a favorable setup developing for other large names to follow, including Johnson & Johnson . IHE is extending its cyclical uptrend with a push to new highs, and the move is being confirmed by a weekly moving average convergence/divergence, or MACD, crossover that reflects renewed intermediate-term momentum. Lilly is roughly 25% of IHE, so its breakout is a meaningful tailwind for the ETF, but IHE’s strength suggests leadership is broadening beyond a single name. On the relative front, the ratio of IHE to the SPX is rebounding off support from its 200-day (40-week) MA, suggesting that pharma is positioned for additional outperformance in the weeks ahead. The ratio is also well positioned in the long-term based on the rising slope of the 40-week MA. Johnson & Johnson is also improving, and the charts suggest it has the potential to reassert leadership within pharma after a period of consolidation. The weekly stochastics have flashed an oversold upturn, a constructive development that often coincides with an intermediate-term low. Momentum is also improving, as JNJ continues to see consecutive upticks in the weekly MACD histogram. From a key levels perspective, initial support is defined by the rising 200-day MA (~$213), while the highs near $249 act as resistance. The daily chart adds an important near-term catalyst. JNJ has an active countertrend “buy” signal from the DeMARK Indicators®, and the daily MACD is back on a “buy” signal, reinforcing the likelihood of upside continuation in the near term. With JNJ breaking back above its 50-day MA and into the daily cloud, the momentum shift has become more evident. The relative trend is another reason JNJ is worth highlighting here. The JNJ vs. SPX Index ratio has seen a countertrend cyclical upmove since the beginning of 2025, defined by a series of higher lows. This countertrend strength comes within a multiyear downtrend, but the cyclical upmove appears to have staying power. Now, with the ratio oversold as it approaches support at its 40-week MA, JNJ is at a relative proving ground and appears poised for another leg higher in both absolute and relative terms. Pharma leadership is being reinforced by IHE’s push to new highs and a fresh weekly MACD crossover, and JNJ is showing the types of intermediate-term signals that can precede rotation into other large-cap bellwethers. With support defined at the 200-day MA and resistance near $249, the risk-reward profile in JNJ is becoming clearer as momentum turns higher. —Katie Stockton with Will TamplinAccess research from Fairlead Strategies for free here . DISCLOSURES: All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. 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