Eli Lilly & Co. (LLY) declined sharply in February to break three support zones. Prices have traded up from their February nadir. Is the coast clear now for the bulls or is there further downside risk? Let's see if the charts and indicators can answer the $64,000 question from the late Hal March.
In this daily bar chart of LLY, below, we can see that prices are still below the declining 50-day moving average line and below the declining 200-day line. A bearish dead cross of the 50-day and 200-day averages can be seen at the end of February as the 50-day line traded under the 200-day line.
The On-Balance-Volume (OBV) line declined only modestly from January into February and has since improved. Standing back from the charts we can see that overall the OBV line has traded up and down with the price action the past year. The Moving Average Convergence Divergence (MACD) oscillator crossed to the upside in February generating a cover shorts buy signal. The indicator has narrowed a little recently but it is also not far below the zero line -- a new signal could be bearish or bullish.
In this weekly bar chart of LLY, below, we can see that prices are below the declining 40-week moving average line. Prices have made low in February but a downtrend has not been established. The overall price pattern the past three years is a large sideways consolidation. The weekly OBV line has also made a large sideways pattern with a low in December 2016. The weekly MACD oscillator is in a bearish mode below the zero line but the two moving averages that make up the indicator have begun to narrow and we could see a cover shorts buy signal in the weeks ahead.
In this Point and Figure chart of LLY, below, we have bearish and bullish clues. A $72.30 price target is being projected but we also can see that a trade up to $80.63 will be a double top breakout and open the way to a rally.
Bottom line: LLY could rally above $81 in the short run and turn the chart more positive but with many indicators in a bearish mode I cannot rule out a retest of the $74 level and perhaps lower. Stay alert.