Eli Lilly Stock Surges - What Do the Charts Say?

Eli Lilly stock is ripping higher on positive data and an FDA clearance for its insulin treatment. Let's chart the shares' course from here.
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Think the S&P 500 was a big winner when it burst higher by about 3% on Tuesday morning? Then get a look at Eli Lilly  (LLY) - Get Report, which is up double digits on the day. 

The stock market is ripping higher on a trifecta of Lilly reports, one of which includes a potential treatment to help in the fight against the coronavirus.

One might try to connect the dots, speculating that the rise in Eli Lilly has something to do with the coronavirus treatment sending the market higher. That’s a role usually affiliated with Gilead Sciences  (GILD) - Get Report or Moderna  (MRNA) - Get Report.

In any regard, Eli Lilly’s surging stock price comes not on the back of any company-specific coronavirus news, although it is working on a treatment as well

Instead, the company got clearance from the FDA for its fast-acting insulin treatment. Eli Lilly also announced positive Phase III data for its abemaciclib breast-cancer treatment.

The catalysts sparked the rally, which has the potential to send Eli Lilly stock to new all-time highs. Let’s take a closer look at the charts.

Trading Eli Lilly Stock

Daily chart of Eli Lilly stock.

Daily chart of Eli Lilly stock.

Let’s call it for what it is: Eli Lilly stock did not look good before Tuesday’s action.

The shares were under notable pressure, down more than 6% in the prior three trading sessions and down about 14% from their high in April. 

Further, the stock hit a two-month low on Monday, while trading below the 50-day and 20-day moving averages.

One day of action is, so far anyway, saving the day. But it’s got investors asking, what now?

I want to see shares hold up above current downtrend resistance (blue line). Above that puts the May and April highs in play at $162.37 and $164.13 respectively. 

A rotation over the latter opens the door to a larger breakout. That is, provided Eli Lilly stock can clear $165, which is about the 161.8% extension from the March low to the February high.

Using that same range, the two-times range extension comes into play at $195, a target long-term investors can use. 

Short-term traders can measure the 123.6% extension for the recent move (the March low to the April high), which comes into play at $175.

In short, let’s look at it like this: A rotation over $165 puts new highs in play, with $175 and $195 being possible upside targets should momentum continue.

If Eli Lilly stock breaks back below downtrend resistance, I want to see if the 50-day moving average acts as support. Below $145 and the June low near $140 is possible.