4 Trade Ideas for Eli Lilly: Bonus Idea

• Posted by Greg Harmon
• on April 19th, 2021

Here is your Bonus Idea with links to the full Top Ten:

Eli Lilly, $LLY, started to move higher in November. It took 3 steps to reach a top at the end of January and then it pulled back slightly. After a 6 week consolidation it gapped down, retracing 38.2% of the move higher, and consolidated again, this time for 4 weeks. Friday it pushed up over short term resistance. The Bollinger Bands® had squeezed in before the breakout. The RSI is rising fast towards the bullish zone with the MACD crossed up but still negative.

There is resistance at 193 and 196.75 then 199.25 and 200.50 before 205 and 208.75 then 212.25. Support lower comes at 187 and 181 then 180 and 177.50 before 172.50 and a gap fill to 166.75. Short interest is low under 1%. The stock pays a dividend with an annual yield of 1.80% and has been trading ex-dividend since February 11th. The company is expected to report earnings next on April 27th.

The April 30 Expiry options chain shows the biggest open interest on the put side at the 172.50 strike. The at-the-money straddle implies an $8 move by expiry, giving an expected range of 181.25 to 197.25. On the call side it is big at 180 and 195. the May chain shows the biggest open interest at the 180 strike and then trailing lower to 165. on the call side it builds to a top at 200 then starts to drop off.

Eli Lilly, Ticker: $LLY

Trade Idea 1: Buy the stock on a move over 190.50 with a stop at 186.50.

Trade Idea 2: Buy the stock on a move over 190.50 and add an April 30 Expiry 187.50/180 Put Spread ($3.85) while selling the May 200 Calls ($1.80).

Trade Idea 3: Buy the May 195/April 30 Expiry 197.50 Call Diagonal ($2.50) and sell the April 30 Expiry 180 Put ($1.00).

Trade Idea 4: Buy the May 180/190/200 Call Spread Risk Reversal for $1.40.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with April options expiration in the books, saw large cap equity markets continue to show strength moving to all-time highs, with the small caps lagging behind in consolidation.

Elsewhere look for Gold to continue its reversal higher while Crude Oil moves out of consolidates to the upside. The US Dollar Index continues to pullback in its short term move higher while US Treasuries are rebounding in their downtrend. The Shanghai Composite looks to pause in its move higher while Emerging Markets consolidate the pullback in their uptrend over long term support.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts look strong on the longer timeframe, especially the large caps. On the shorter timeframe both the QQQ and SPY driving higher in strong fashion, while the IWM consolidates just under the highs. Use this information as you prepare for the coming week and trad’em well

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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