Eli Lilly Stock Rallies 10.11% on Three-Day Bullish Run Driven by Bullish Engulfing Pattern and Moving Average Convergence

Eli Lilly (LLY) has experienced a significant upward move, with a 2.95% gain on the most recent session, extending a three-day rally that has propelled the stock 10.11%. This sharp rebound follows a volatile correction phase marked by a -14.14% single-day decline in early August 2025. The price action suggests a potential retesting of key support levels established during that selloff, with immediate resistance forming near the 200-day moving average, which currently aligns with the recent high of $1,017.78.

Candlestick Theory

The recent three-day bullish trend features a "bullish engulfing" pattern, with the final candlestick’s body entirely covering the prior bearish candle. This suggests strong buying pressure after a period of consolidation. Key support levels identified include $813.53 (a prior swing low in early October 2025) and $763.00 (a psychological round number and previous consolidation zone). Resistance is clustered near $990.10 (a recent intraday low) and the 200-day MA. A break above $1,017.78 could trigger a retest of the May 2025 high of $839.87, but a failure to hold above $813.53 may indicate renewed bearish momentum.

Moving Average Theory

The 50-day moving average (currently ~$850) is positioned below the 200-day MA (~$870), indicating a bearish trend in the longer term. However, the recent rally has brought the 50-day MA closer to the 200-day MA, suggesting potential convergence. The 10-day MA (~$920) has crossed above the 50-day MA, forming a short-term bullish signal. This "golden cross" scenario, combined with the stock trading above its 10-day MA, supports a near-term bullish bias, though the 200-day MA remains a critical threshold for confirming a sustained trend reversal.

MACD & KDJ Indicators

The MACD histogram has transitioned from negative to positive territory, with the MACD line crossing above the signal line, confirming a bullish crossover. This aligns with the KDJ indicator, where the %K line (~85) and %D line (~75) suggest overbought conditions. However, the divergence between the KDJ oscillator and the MACD—where the %K line has peaked while the MACD remains upward—hints at potential exhaustion in the short-term rally. A bearish crossover in the KDJ could precede a pullback, but the MACD’s strength suggests the uptrend may persist.

Bollinger Bands

Volatility has expanded significantly, with the bands widening from a 15-day average of $35 to a current width of $65. The price has tested the upper band multiple times in the past week, indicating overbought conditions. A sustained close above the upper band ($1,022.42) would signal a breakout, while a retreat to the lower band ($990.10) may trigger a consolidation phase. The recent contraction in the bands during the August selloff (width of $25) preceded a sharp rebound, suggesting similar dynamics could repeat.

Volume-Price Relationship

Trading volume has surged to multi-month highs, with the most recent session’s volume (5.17 million shares) exceeding the 50-day average by 30%. This validates the recent rally’s strength, as increased volume typically confirms trend continuation. However, the volume profile shows a "distribution" pattern in early November 2025, where declining volume accompanied a price pullback. A similar decline in volume during the current rally could indicate waning momentum, while sustained high volume supports further gains.

Relative Strength Index (RSI)

The 14-day RSI has reached 68, nearing overbought territory (70 threshold). While this suggests a potential pullback, the RSI’s divergence from price action—where the RSI has not peaked despite a sharp price rise—indicates caution. Historical data shows the RSI often corrects to the 50-55 range after reaching 70, implying a 15-20% retracement is possible. However, the RSI’s rapid ascent also reflects strong institutional buying, which could extend the uptrend.

Fibonacci Retracement

Key Fibonacci levels from the August 2025 low ($640.86) to the recent high ($1,017.78) include 61.8% at $785 and 50% at $829. The current price is testing the 38.2% retracement level ($885), which has historically acted as a dynamic support/resistance zone. A break below $829 could target the 50% level, while a move above $990 may test the 61.8% level before encountering the 78.6% retracement at $920.

Backtest Hypothesis

The MACD Golden Cross event, as observed in the recent data, has historically shown a 70.27% success rate over 30 days, with maximum returns reaching 10.02% at 59 days post-event. Applying this to the current scenario, a long position initiated at the MACD crossover (e.g., November 12, 2025 close of $1,017.78) would align with the 30-day target of $1,119.56 (10% gain). However, this strategy requires a stop-loss below the 50% Fibonacci level ($829) to mitigate risk from a potential bearish divergence in the KDJ indicator. The backtest’s 56.76% 3-day win rate further supports a short-term bullish outlook, though the RSI’s proximity to overbought levels warrants caution.