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Key Takeaways
- Eli Lilly shares dropped more than 4% on Thursday as investors assessed the possible impact of a promising new weight-loss injection developed by Viking Therapeutics on the drugmaker’s own anti-obesity drug, Mounjaro.
- The stock’s technicals, including bearish divergence and a decisive close beneath a multi-month uptrend line and the 50-day moving average, point to a potential reversal.
- Eli Lilly shares may encounter support on the chart from prior price action at $790, $725, and $625.
- A bars pattern, extracting the trending move from April to July and applies it from Thursday’s low, projects an upside price target of around $1,060.
Eli Lilly ( LLY ) shares dropped more than 4% on Thursday, continuing a hasty retreat from their record high earlier this month, as investors assessed the possible impact of a promising new weight-loss injection developed by Viking Therapeutics ( VKTX ) on the drugmaker’s own weigh anti-obesity drug, Mounjaro. Last week, Eli Lilly shares tumbled after Swiss pharmaceutical firm Roche Holding AG said its new non-injectable weight-loss drug has shown encouraging early stage data .
Below, we take a closer look at Eli Lilly’s chart and point out important price levels to watch out for using technical analysis .
Chart Signals Potential Reversal
Eli Lilly shares have trended consistently higher since the 50-day moving average (MA) crossed above the 200-day MA in April last year to form a bullish golden cross signal. However, the stock’s technicals point to a potential reversal .
Firstly, as the drug maker’s stock climbed to a record high earlier this month, the relative strength index (RSI) made a comparatively lower peak to create a bearish divergence , indicating slowing buying momentum. Secondly, the price closed decisively below a multi-month uptrend line and the 50-day MA on Thursday, suggesting a breakdown of the longer-term trend.
Watch These Key Support Levels
Eli Lilly shares were down 0.1% at $820.00 in premarket trading about two hours before Friday’s opening bell. The stock has lost 15% of its value since hitting its all-time intraday high of $966.10 on July 15.
If Eli Lilly shares continue their decline, investors should monitor three key areas on the chart where they could encounter support .
The first level to watch sits around $790, an area where the stock may attract buying interest near a horizontal line connecting an extended period of consolidation between February and May within the longer-term uptrend.
A close below this area could see a fall to the $725 region, where the price would likely find support from the lower portion of the consolidation period discussed above, which also currently closely aligns with the rising 200-day MA.
Finally, a more significant drop opens the door to a retest of the $625 level, where buyers may be happy to scoop up shares near a trendline linking the October and November 2023 swing highs with the low of a minor pullback in January this year.
Bear Trap Still a Possibility
If the current breakdown turns out to be a bear trap , which lures investors into selling before the price makes a prompt recovery, we can speculate an upside target by using a bars pattern.
We do this by extracting the trending move from April to July and applying it from Thursday’s low, which predicts a price target of around $1,060.
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As of the date this article was written, the author does not own any of the above securities.