Trading Idea - Eli Lilly A Hammer Formed

Published on Wednesday, 24 October 2012 05:00 Written by TradersHuddle Wire

New York, October 24th (TradersHuddle.com) - Shares of Eli Lilly & Co. (NYSE:LLY) ended the trading session lower by $0.37 or -0.71% from its previous close. Eli Lilly's price action in the session formed what is considered to be a Hammer, where bears drove prices lower intraday. However, the strong finish indicates that bulls regained control, forming a trend reversal.

Eli Lilly (NYSE:LLY) principal activities are to develop, manufacture and market pharmaceutical-based health care solutions. The company specializes in research and development, production and marketing of products for the treatment of diabetes worldwide, such as insulin and insulin delivery devices.. Some of the company's patents include Zyprexa, Prozac, Permax, Humulin, Evista, Humalog, Humatrope, Vancocin, Keflex, Nebcin , Lorabid, Gemzar, Tylan, and Rumensin.

Eli Lilly's stock has been trading in a well defined range with calculated support at $50.00 and resistance at $53.99. This range can be used by traders to plan their next moves.

Traders wanting to establish a position in Eli Lilly or traders that are already holding the stock can use the hammer formation to their advantage, since the pattern signal a potential bullish trend reversal.

The Hammer is an important candlestick pattern, as it can mark bottoms and support levels. Further buying pressure, and preferably on expanding volume, is needed before acting, as heavy volume will serve to confirm the validity of the reversal.

In the case of Eli Lilly, traders who want to add to their positions or start a new position, need to watch for confirmation of the reversal. Below a Hammer illustration: