SIA Charts’ relative strength rankings help investors identify opportunities in stocks that are outperforming their peers or index benchmarks on a relative basis. Outperformance often reflects improving investor expectations for strong company growth. Conversely, underperformance in this ranking system can protect SIA practitioners by steering their clients away from declining stocks well before significant losses occur. Recent developments concerning Eli Lilly & Company (LLY) have caught our attention. Our last reviews of LLY were conducted on April 9, 2024, and August 16, 2023, when the stock prices were $777.29 and $546.62, respectively. At those times, LLY was highly ranked in the Favored Green Zone of the SIA S&P 100 Index Report, reflecting its strong performance and leadership position. The stock had surged from just over $150 in 2021 to as high as $950. However, recent data suggest a shift. LLY is now showing signs of weakness, with our primary indicator—relative strength—issuing its first sell signal for the stock in years. The relative strength position chart indicates that LLY has moved into the Neutral Yellow Zone. Additionally, the stock's SMAX score has dropped to 5 out of 10, suggesting weak short-term performance compared to other asset classes. Consequently, LLY's position in the SIA S&P 100 Index has fallen to #40 (Unfavored Yellow Zone), marking a decline of 38 spots in the past month. This shift in ranking and performance metrics suggests that investors should proceed with caution. Examining the attached candlestick chart of Eli Lilly & Co., we observe a positive trend line (orange) that was established in April 2023. This trend line supported a rally from $300 to higher levels, but the stock has recently corrected, settling around the $800 level—a support area near the trend line. A break below this level and the trend line would target the next support levels at $700 and $600. Volume metrics during this correction are relatively low, so investors should watch for any increases in volume. The lack of relative strength compared to peers and other asset classes puts LLY on defense. Despite its historical success in many SIA models, our rules-based methodology now favors new leadership names in the Favored Green Zone.
Turning to the point-and-figure chart, which includes colors representing LLY's position in the SIA S&P 100 Index Report, we see the stock's significant run-up as a top performer. However, the final column indicates a shift to the yellow zone, and the SMAX score of 5 suggests enough relative weakness to prompt a reevaluation in our models. Support is currently at $778.23, with additional support levels at $718.96. Should these levels be breached, further support would be at $613.63 and $600. If the stock deteriorates to these lower limits, we will update our DSR to reassess support levels. While there are fundamental reasons to remain bullish on LLY, the focus here is on money flows, which our relative strength matrices detect effectively. Currently, LLY appears to be in a phase of distribution rather than accumulation. Should the situation improve and shares begin to be reaccumulated, resistance is at $859.22 (3-Box) and the upper limit is at $967.63.
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