Technical Analyst, Saxo Bank Group
Eli Lilly LLY (Weight loss and Diabetes drug competitor to Novo Nordisk) formed yesterday a Bearish Engulfing top and reversal pattern on the daily chart
The RSI indicator has been in overbought territory at at extreme level at 90. However, there is no divergence indicating higher levels could be seen but the Bearish Engulfing pattern is a fairly strong top and reversal indicator.
If LLY is closing below 725 it could be hit with a larger corrective sell-off down to the gap area at 691.
Bears will then try to closing the gap i.e., trying to push LLY down to 667.65.
On the weekly chart LLY could also here be in the process of forming a Bearish Engulfing top and reversal pattern
RSI divergence has been indicating uptrend exhaustion for a few weeks by now.
The bearish/corrective scenario is quite likely to unfold if LLY is closing the week below 740.80 (horizontal dashed blue line)
If that scenario plays out a larger sell-off could hit the share price and the Consolidation area between 612 and 560 could come in to play. However, the gap are is a quite strong support area
To demolish the top and reversal pattern a close above the peak at 793.38 is needed.
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