In his "No-Huddle Offense" segment of Mad Money Wednesday night, Jim Cramer showcased examples of why the market has become so difficult to navigate. For example, shares of Eli Lilly & Co. (LLY) fell from $118 to $112 earlier this week after the company presented what analysts felt was disappointing data on a new drug.
But on Wednesday, shares rose 2.7% on no news at all. We recently wrote about LLY, noting that "LLY is buy-able with sell stop below $113 or on strength above $121." Let's step back and look at the bigger picture through charts and indicators.
In this daily bar chart of LLY, below, we can see that prices recently gapped below the cresting 200-day moving average line. Prices bounced back to the underside of the line. The slope of the 50-day moving average line has been bearish since late April.
The daily On-Balance-Volume (OBV) line has been edging lower recently and the Moving Average Convergence Divergence (MACD) oscillator is crossing to the downside from below the zero line - an outright sell signal.
In this weekly bar chart of LLY, below, we can see a mixed to weak picture. Prices are below the rising 40-week moving average line.
The weekly OBV line has been weakening since the end of February and the MACD oscillator is in a take profits sell mode and heading towards the zero line and a possible outright sell signal.
In this Point and Figure chart of LLY, below, the software is now projecting a possible downside price target in the $95-$94 area. A trade at $120.05 would be bullish.
Bottom line strategy: One day a stock looks bullish but then it breaks below the rising 200-day average line and the narrative changes. The weekly bar chart and the Point and Figure now look bearish so I would be more defensive with LLY.