Action Alerts PLUS holding Eli Lilly (LLY) is in no-man's technical land. It has not broken out decisively on the upside to satisfy the bulls, and then again it has not turned down enough to fit into my bearish or cautious view.
Prices did push up to a new high of $89.09 the other day but then retreated quickly. Are prices just playing a game of "cat and mouse" or I am just reading something into the price action to suit my bias? Hard to tell, honestly, but let us check out some new charts anyway.
In this daily Japanese candlestick chart of LLY, above, we can also use our favorite Western technical tools on the chart, such as moving averages, as well as tools below the chart like the On-Balance-Volume (OBV) line and momentum.
This chart shows a string of white real bodies denoting an uptrend in the past two weeks. Yesterday's candle (Thursday) shows a large upper shadow where prices pushed to the upside but were eventually pushed back down. An upside rejection like this shows that traders and investors have sold the rally.
So far today, the chart shows a balance between buyers and sellers with a small real body. A bearish candle on Monday could complete a reversal pattern but we will need to wait until then. The daily OBV line has been rising but the momentum study shows roughly equal highs since early September, indicating a potential bearish divergence.
In this weekly bar chart of LLY, above, we still have a mixed picture. Prices have pushed up into resistance in the $86 to $92 area from 2015. LLY is above the rising 40-week moving average line. Volume is pretty much neutral and the OBV line has been moving sideways for several months. Weekly momentum is likely to show a bearish divergence going forward.
Bottom line: Yes, LLY is close to an important breakout and maybe I am fighting the tape a little, but I do not get the same bullish readings that I have gotten from other charts this past year. Hard to really quantify. Stay tuned.