The American pharmaceutical company headquartered in Indianapolis, Indiana, Eli Lilly And Co (NYSE: LLY) seem to be gearing up for a surge as per its latest charts.
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as pink color lines. A breakout from a symmetrical triangle pattern usually signifies the start of a bullish move.
Daily Chart – LLY
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line is greater than (-DI), and ADX has started to move up from below (-DI) and (+DI).
#4 Bullish MACD: The MACD line is above the MACD signal line in the daily chart, indicating possible bullishness.
#5 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#6 Unbroken Uptrend: The weekly chart shows that the stock’s uptrend is unbroken, as it has been forming higher highs and higher lows for the past several months. This uptrend line has been marked as a purple color line. This is a possible bullish sign.
Weekly Chart – LLY
#7 Above MAs: The stock is currently trading above its 50-week as well as 200-week SMA, indicating a bullish bias.
#8 Bullish Stoch: The %K line (blue line) is currently above the %D line (orange line) of the stochastic in the weekly chart. This usually indicates bullishness.
#9 Bullish MACD: The MACD line is above the signal line in the weekly chart and is also moving higher from oversold levels. All these indicate a possible bullish bias.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for LLY is above yesterday’s high, which translates to a price of around $159.00.
TP: Our target prices are $170 and $180 in the next 3-6 months.
SL: To limit risk, place a stop loss at $151.40. Note that this stop loss is on a closing basis.
Our target potential upside is nearly 7% to 13% in the next 3-6 months.
For a risk of $7.60, the target rewards are $11.00 and $21.00. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the symmetrical triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara