Eli Lilly and Co. (LLY) is trading a bit higher in pre-market activity as traders and investors react bullishly to the better-than-anticipated third-quarter numbers and increased profit guidance for all of 2018. Can prices break out to a new all-time high or should we be a little cautious with the broad market weakness? Let's drill down in the charts and indicators to see what they suggest.
In this daily bar chart of LLY, below, we can see the strength in the share price this year. Not a tech-stock double but pretty impressive. Prices have been correcting those gains over the last month, but LLY is now back above the rising 50-day moving average line. The slower-to-react 200-day moving average line has a positive slope and we also can see a bullish golden cross in late June, when the 50-day average line crossed above the 200-day line.
The On-Balance-Volume (OBV) shows a bullish rise from April and a leveling off in October. A higher close on strong volume here on Tuesday could push the OBV line to a new high to confirm the price gains. The trend-following Moving Average Convergence Divergence (MACD) oscillator is down at the zero line, telling us that there was no strength to the trend. However, if the indicator turns up from here it will be a fresh go-long signal.
In this weekly bar chart of LLY, we can see a big base or consolidation pattern followed by an upside breakout. Prices are above the rising 40-week moving average line. The weekly OBV line shows a two-year uptrend and confirms the price gains. The weekly MACD oscillator crossed to a take-profits sell signal but could reverse to the upside if prices continue to rally from here.
In this Point and Figure chart of LLY, we can see an upside price target of $122.91 and that a trade at $117.69 will be an upside breakout.
Bottom line strategy: LLY by itself looks poised for new highs, but broad market weakness could mute those gains. Traders should still approach LLY from the long side, risking a close below $104. The $123 area is our price target.