In his first "Executive Decision" segment of Mad Money Monday evening, Jim Cramer spoke with David Ricks, chairman and CEO of Eli Lilly & Co. (LLY) , the drug maker whose shares fell 1.9% Monday, along with the broader markets, despite posting positive clinical trial data on the company's breast cancer therapy.
Ricks explained that Lilly's treatment, when added to the current standard of care, has shown to reduce the rate of breast cancer recurrence by 25%. He called the data "great news" for patients and their families, and called it the first significant advancement in almost 20 years.
Ricks also commented on the company's recent work creating neutralizing antibodies to treat Covid-19 patients. He said in just six months' time, they've gone from nothing to clinical trial data showing they can reduce hospitalization rates by as much as 72%. He said they continue to test their antibodies at hard-hit nursing homes and have partnered with Amgen Inc. (AMGN) to help with manufacturing.
Doctors love to look at charts so let's check out the price charts of LLY.
In the daily bar chart of LLY, below, we can see that the shares have trended higher the past 12 months. Prices corrected lower in July and August and have tested the rising 200-day moving average line this month. A recent upside bounce tested the underside of the declining 50-day moving average line. Strength Tuesday could put prices above the 50-day line by the close.
Trading volume and the On-Balance-Volume (OBV) line declined with prices in July and August but the OBV line has turned upward in recent days. A rising OBV line only happens when traders become more aggressive buyers and volume is heavier on days when the stock closes higher.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has turned upward for a cover shorts buy signal and is not far from crossing the zero line for an outright buy signal.
In the weekly bar chart of LLY, below, we can see that prices are holding above the rising 40-week moving average line.
The weekly OBV line looks like it is curving upward from August and the MACD oscillator has been narrowing toward a bullish crossover above the zero line.
In this daily Point and Figure chart of LLY, below, we can see that the chart suggests the $139 area as a possible downside price objective. Note that a rally to $155.50 or higher will probably turn the chart bullish.
In this weekly close-only Point and Figure chart of LLY, below, we can see a potential price target in the $208 area.
Bottom-line strategy: Successful tests of a rising 200-day moving average line can be great entry points for longs. Traders could long LLY or add to longs at current levels risking a close below $145 or below the 200-day moving average line. Our price target for now is $200.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
