Will Eli Lilly recover?

Published on Friday, 20 August 2010 04:52 Written by Christopher Lynn

New York, August 20th (TradersHuddle.com) - Shares of Eli Lilly & Co. (NYSE:LLY) closed the trading session at $34.28 below calculated support at $34.45 breaking current long setups, raising concerns by the bulls, as this move might give the bears the upper hand.

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 was trading in a well defined range with support at $34.45 and resistance at $37.92; given that this range was broken traders will be closely monitoring the stock?s price action for clues of direction.

From a technical perspective it can be expected that previous support becomes resistance, as the new range gets defined, however, given that Eli Lilly's stock is still near the broken support, traders will be focusing on $34.45 to see if the stock can bounce back and return to its previous range.

Traders wanting to establish a short position in Eli Lilly can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $34.45. For traders wanting to establish a long position, wait for price action to take the stock back to calculated support, which will provide a best entry point to build the position.