Equities

Technical Update - ELI LILLY Top and reversal pattern indicating larger correction could unfold

2 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

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.

Source all charts and data: Saxo Group

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