Eli Lilly Jumps 3% As Technicals Signal Potential Rebound From Key Support

Eli Lilly (LLY) gained 3.01% to close at $762.33 in the most recent session, rebounding from the previous day's decline and finding support near the $740 level. This price action initiates the technical analysis across multiple frameworks.
Candlestick Theory
Recent price action reveals significant candlestick dynamics. The sharp decline on July 29th formed a pronounced bearish candle with high volume, establishing resistance near $780. The subsequent session on July 31st closed near its low, confirming bearish pressure, while the August 1st session formed a substantial bullish engulfing candle that closed near its high. This pattern suggests a potential reversal, finding solid support near $735-$740. Key resistance now emerges between $780-$785, aligning with the July 30th high and recent rejection zone. The $740-$745 area has solidified as crucial short-term support.
Moving Average Theory
The 50-day moving average (approximately $780-$785 based on price distribution) currently caps the upside, with the price trading below it. The 100-day MA (estimated near $800) and 200-day MA (around $850) slope downwards, confirming the intermediate-term downtrend from the April highs above $900. However, the recent bullish close and the 50-day MA flattening suggest potential stabilization. A decisive break above the 50-day MA would signal improving near-term momentum, while failure near this level reinforces the bearish trend.
MACD & KDJ Indicators
The MACD histogram (calculated by diffusing moving averages) appears poised for a potential bullish crossover after a period of negative momentum. This aligns with the bullish candle, suggesting waning downward pressure. The KDJ oscillator shows the %K line crossing above the %D line from oversold territory (<30) around July 31st/August 1st, reinforcing potential positive momentum shift. While not yet definitive, both oscillators suggest downside momentum may be exhausting, increasing the probability of further near-term recovery, especially if the MACD confirms with a signal line crossover.
Bollinger Bands
Volatility contracted significantly in late July, evidenced by narrowing bands around the $740-$770 zone. The sharp price rise on August 1st pushed the price upwards to touch the upper Bollinger Band near $768, marking a volatility expansion and a breakout from the recent consolidation range. This breakout move typically signals the start of a directional move. Price closing near the high suggests strength; holding above the middle band (roughly $760-$765) is key for sustaining bullish momentum short-term. A rejection from the upper band could see a retest of the middle band as support.
Volume-Price Relationship
Volume surged significantly during breakdowns (e.g., July 29th, May 1st) and key reversal days (e.g., August 1st, April 17th), confirming conviction behind those moves. The recent bounce on August 1st occurred on elevated volume compared to the prior two sessions, lending credibility to the bullish reversal attempt. However, volume remains lower than during the major breakdowns. Sustained recovery requires confirmation through increasing volume on continued upward movement. The high volume at the April peak ($902.50) and the May 1st collapse underscore the $850-$900 zone as a major future resistance.
Relative Strength Index (RSI)
The 14-day RSI (calculated as [Avg Gain / (Avg Gain + Avg Loss)] 100) dipped to approximately 35 around July 31st, approaching oversold territory but avoiding extremes. The subsequent rebound has lifted the RSI sharply towards the mid-50s, showing strong near-term momentum and removing immediate oversold conditions. It remains well below overbought levels (>70), suggesting room for potential upside. However, the RSI is a warning indicator; its recovery from moderate oversold levels needs price confirmation to signal a robust reversal.
Fibonacci Retracement
Applying Fibonacci retracement to the dominant downtrend from the April peak ($902.50) to the July low ($735.44) establishes key potential reversal levels. The 38.2% retracement level lies near $795, closely aligning with the early July resistance and the 100-day moving average. The 50% retracement is around $819, and the 61.8% level near $842 targets the early June breakdown area. These levels, particularly $795 (38.2%) and $819 (50%), represent significant upside hurdles should the current recovery attempt extend.
Confluence & Divergence
Confluence exists around the $780-$800 zone. This area represents the 50-day MA resistance, the 38.2% Fibonacci retracement, the psychological $800 level, and a zone of prior consolidation breakdowns (early July). Simultaneously, positive divergence is observed: the August 1st price low ($745.99) was higher than the July 31st low ($735.44), while the MACD and KDJ formed higher lows or bullish configurations during the same period, suggesting weakening downside momentum prior to the bounce. A confirmed break above $780 would leverage this confluence and divergence to signal a stronger reversal.
Conclusion
Eli Lilly exhibits nascent signs of a potential short-term recovery, evidenced by the strong bullish engulfing candle, improving momentum oscillators (MACD & KDJ), a volatility breakout, and an RSI rebound supported by decent volume, all from key support near $740. However, the downtrend remains technically intact below the 50-day MA (~$780-$785). Overcoming the $780-$800 confluence zone (50-day MA, 38.2% Fib, prior support/resistance) on sustained volume is critical to validate a more durable recovery and target the 50% retracement near $819. Failure below $780 keeps the bearish structure dominant, with key support remaining at $740-$745 and major resistance above $800. The interplay between the recent momentum surge and the overhead resistance creates a pivotal technical juncture.