We wrote about Eli Lilly (LLY) just the other day, and we did not warm up to it. "LLY could break out over $86 and I would respect the move, but right now I believe the path of least resistance for LLY is lower." Prices have traded unevenly this week but prices have not moved much from Monday's opening, telling us that there is a balance in the marketplace between bulls and bears.
Let's look at a candlestick chart to show you what I am looking at right now.
In this weekly candlestick chart, below, we compare the opening on Monday to the close on Friday (today). This chart currently shows a doji or, if you wish, a spinning top after three bullish (white) candles. We don't exactly know where prices will finish at 4pm today but right now LLY has not moved much from Monday's opening. What does this mean? The Japanese say that the essence of the trading day is the relationship of the open to the close. If the close is higher than the open then the bulls are in charge. If the close is below the open then the candle is negative and the bears are in charge. If the current week's candle is neutral or showing a balance between bulls and bears then next week's pattern is key. A bullish candle will refresh the uptrend and a bearish candle will confirm a reversal.
In this daily bar chart of LLY, below, we can see the sideways trading range going on since February. LLY is showing roughly equal lows in May and August but lower highs in April, Jul, and perhaps September. Prices are above the flat 50-day moving average line and above the slightly rising 200-day moving average line. The pattern of volume is hard to see but it does not show a rising pattern which would be bullish. The On-Balance-Volume (OBV) line is easier to read as a line chart and is neutral looking as it moves sideways. In the lower chart is the slow stochastic indicator which shows an overbought reading for LLY similar to the readings in July and June.
Bottom line -- yes, yes I could be dead wrong and LLY could break out on the upside. You can email me your complaints next week. But in the meantime I am not sold on LLY and I look for lower prices ahead.