Eli Lilly's Chart is a Perfect Storm

Ed Ponsi

Shares of Eli Lilly & Co. (LLY) have put in a strong performance this year, gaining 23%. That's impressive, when you consider that the pharmaceutical industry as a whole has underperformed the overall market. 

In this comparison chart, we see that the S&P 500 (black) is basically flat for the year. The pharmaceutical sector, represented here by the S&P Select Pharmaceuticals ETF, symbol XPH in green, has lost about 5% year-to-date. Eli Lilly, shown in blue, far outperforms both the market and its sector. 

In the following comparison chart, we see the relative performance of these three instruments. Performance figures are year-to-date, while the chart provides a visual representation of all three instruments since the March lows. 

comparison chart
Eli Lilly (blue) vs. XPH (green) vs S&P 500 (black). Chart by TradeStation

While Eli Lilly has been one of the best-performing stocks in its sector, a perfect storm could be brewing on its chart. Eli Lilly may be about to become a victim of its own success. 

Since closing at its all-time high on July 8th (H), the stock has formed a lower high (LH) and a lower low (LL). Major support is located nearby at $158, where a trend line (black dotted line) and the stock's 50-day moving average (blue) coincide. 

If Eli Lilly breaks $158, the next support level comes in near $145. 

LLY

Eli Lilly reported earnings on July 30 before the opening bell. The company earned $1.55 per share, one penny shy of estimates, and revenues came in at $5.5 billion. Analysts estimated revenues at $5.75 billion.

Eli Lilly raised earnings estimates for the year to a range of $7.20 - $7.40 per share, and also upped its full-year revenue guidance, from $23.7 billion to $24.2 billion. 

Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.