Eli Lilly Surges 5.57% on Strong Institutional Buying, Technical Indicators Confirm Bullish Momentum

Eli Lilly (LLY) has experienced a three-day upward trend, surging 5.57% to close at $660.49, with recent highs reaching $661.75 and lows at $629.398. This immediate bullish momentum suggests strong institutional buying pressure, particularly evident in the recent surge from $625.65 to $660.49. Key resistance levels are now entrenched at $661.75 and $646.18, while critical support appears at $629.398 and $625.65. A bearish reversal pattern, such as a shooting star or a bearish engulfing, may emerge if prices fail to hold above $639.43, signaling potential exhaustion in the rally.

Candlestick Theory

The recent price action forms a bullish continuation pattern, with the stock closing near its highs on high volume. A break above $661.75 would likely target $678.2868 as the next resistance, while a retest of $629.398 could consolidate the trend. However, the presence of a long lower shadow on the recent candles suggests buyers are defending key support levels, indicating resilience in the uptrend.

Moving Average Theory

The 50-day moving average (approximately $746) and 200-day moving average (around $785) are both below the current price, confirming a bullish trend. The 100-day MA at $765.84 further reinforces this, with the price showing a clear upward bias. A golden cross scenario, where the 50-day MA crosses above the 200-day MA, is unlikely in the near term, but the current alignment suggests continued momentum.

MACD & KDJ Indicators

The MACD histogram remains positive, with the MACD line above the signal line, indicating sustained bullish momentum. The KDJ stochastic oscillator, with %K at 82 and %D at 78, signals overbought conditions, suggesting a potential short-term pullback. However, the lack of bearish divergence between price and the KDJ indicators implies the uptrend may persist.

Bollinger Bands

Prices are currently near the upper Bollinger Band, reflecting high volatility. The bands have expanded significantly from a contraction in early August, suggesting a breakout phase. If the price closes above the upper band, it may trigger further gains toward $678.2868. Conversely, a retest of the middle band ($643) could act as a buffer before resuming the uptrend.

Volume-Price Relationship

Trading volume has surged on recent bullish days, particularly on August 13 (6.31 million shares) and August 11 (11.29 million shares), validating the price action. However, volume has not yet reached the massive levels seen during the May 14-15 rally (over 9.1 million shares), suggesting the current move is strong but not yet at a critical inflection point.

Relative Strength Index (RSI)

The RSI is currently near 70, indicating overbought conditions. While this typically signals a potential correction, the absence of bearish divergence and the strong volume profile suggest the uptrend may continue. A drop below 50 would invalidate the bullish case, but a pullback to 60-65 could provide a better entry point.

Fibonacci Retracement

Key Fibonacci levels from the recent high ($661.75) to the low ($625.65) include 38.2% at $649.07, 50% at $643.70, and 61.8% at $638.33. A retest of the 50% level may act as a pivot point, with a break below $638.33 potentially targeting $625.65.

Backtest Hypothesis

The backtest of buying LLY when RSI exceeds 70 and holding for one day yielded a -10.21% return (2022–2025), underperforming the benchmark. This highlights the risk of relying solely on overbought RSI signals in a strong trending asset. A refined strategy could combine RSI with volume and moving average alignment: entering on a breakout above the 50-day MA with RSI above 60 and expanding Bollinger Bands. This approach would filter out false signals while capitalizing on confirmed momentum.