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Actionable news in LLY: ELI LILLY & CO.,

Eli Lilly (LLY) Stock: We Favor the Upside

NEW YORK (TheStreet) -- The swings in the price of Eli Lilly (LLY - Get Report) could have unnerved even the most seasoned traders lately. It's been up, down, up, and down again.

In this classic vertical bar chart, above, we can see the ups and downs over the past four months. Notice the breakdown in August that had no downside follow-through and the upside breakout in September that also reversed.

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In this chart above, we used just closing prices, ignoring the highs and lows to get a clearer picture of LLY. The up and down swings should stand out better.

The past two months would have whipsawed short-term traders from long to short and back to long again. Though not textbook, these swings strongly suggest a broadening pattern.

Forty years ago, I learned that broadening patterns can be reversals, e.g. from up to down, or they can be continuation patterns, continuing the move before the pattern formed.

The declining On-Balance-Volume (OBV) line suggests that traders have been liquidating positions. But LLY has tripled from its 2009 low, and I wouldn't anticipate that a strong trend would reverse in a few...


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