With weight-loss treatments getting more buzz, Eli Lilly has been one of the beneficiaries. While it's been in a long-term uptrend, Eli Lilly stock has also been good for shorter-term swing trading.
Swing Trading Example: Eli Lilly Stock
Our most recent trade on Eli Lilly stock was after it spent some time in a mild flat base of just 13%. The 50-day moving average was itself flat during the shallow consolidation. When LLY stock popped over that line, it broke above a downtrend as well and we added it to SwingTrader (1). Notably, this initial thrust was at a time when tech was getting hard hit to start the year. We were thinking maybe some rotation was going on and were quickly rewarded with confirmation.
Stephen Mulholland talks about the Fed Mistake Index and valuations in this week's podcast.
Despite further weakness in the market indexes, Eli Lilly stock jumped the next day and we took our first third of profit (2). Another day and we already had a 5% gain (3) but the downside reversal was a cause for concern, especially amid so many stocks pulling back. We actually took another third profit to lock in our gains before the reversal started taking hold.
Short-term Moving Averages Can Help Secure Profits
Beyond that, Eli Lilly stock acted orderly over the next week. The downside reversal led to some temporary weakness but the short-term 5-day moving average provided support (4). In fact, it held that line well over the next week.
Another downside reversal hit LLY stock after a week's time but it still held its 5-day line so we gave it room (5). The weakness the next day was in line with expectations but the stock did stop at its 10-day line (6). Depending on how quickly you like taking profits, the 5-day line breach would have been a justifiable exit for this stock. We had lower market exposure at the time due to profit taking and loss cutting. Since there weren't many other stocks setting up, we gave Eli Lilly stock an extra day since it was still a winner and we had room.
It ended up costing us a little as the 10-day line was breached (7) and we exited our remaining shares. Sure we could have used the 21-day moving average as a line in the sand and still stayed profitable. But that could have cost more profits than we were willing to give up.
Don't Let LLY Stock Drop Off Your Radar
Still it's worth noting that the 21-day line has held up, making it an easy hold for position traders. More importantly, we aren't letting this stock drop off our radar. The recent flat action is reminiscent of our previous entry, but giving up even less ground and acting tighter. The setup is enough to garner it a spot as one of the IBD Stock of the Day selections this week. It's a stark reminder that Eli Lilly stock offers more than weight-loss treatment. A subsidiary showed recent successful gene therapy treatment for hearing loss, Alzheimer treatments continue to garner attention and acquisitions are opening new opportunities. Just because you sell a stock doesn't mean it should be gone forever.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
