Big Drug Stock Set Up at Key Level

01/26/2012 9:00 am EST


Tim Bourquin

Co-Founder, The Traders Expo and The Futures & Forex Expo

An early-year decline has taken shares of drug maker Eli Lilly & Co. (LLY) to strong moving average support, potentially in advance of a new run to higher prices. If support holds, here’s how to play it.

It’s been a tough start in 2012 for Eli Lilly & Co (LLY). The drug maker enjoyed a nice holiday season in December after slowly rising through the summer and testing its 200-day moving average (MA) multiple times.

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LLY now sits carefully at its 50-day moving average, which appears to be holding as support. The MACD appears that it may just ever-so-slightly be starting to flatten, and the CCI indicator has been bouncing off the lower line, confused, it seems, about which direction to go confidently.

Learn more: Demystifying the MACD Indicator

Should the 50-day moving average hold as support, I would look for LLY to make a move toward the previous high in the area of $42. A stop just below the 50-day moving average ($38.90 for conservative traders and $38 for more aggressive traders) would be warranted.

By Tim Bourquin, co-founder, The Traders Expo

Tim will be moderating several panel discussions at February’s New York Traders Expo.

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