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On the SPOT blog (02/27/2023) [L..]

Today's economic news showed that durable goods sales fell quite a bit in January. These include "long lasting" goods such as appliances, vehicles etc. Perhaps this implies that consumers put brakes on buying big ticker items as the inflationary pressures mount. This might imply a point for fight against inflation as manufacturers might have drop prices (speculating). This could be the reason why at the time of writing this blog (morning PST), all three major US indices are in the green. Remains to be seen if this color holds into the finish after one of the worst weeks for stocks this year.

Some notable retailers such as Costco and Target are expected to report their quarterly results this week. Before that, let's revisit Eli Lilly (ticker LLY) as it seems to have checked into the discounted zone. In its most recently reported quarterly results, LLY beat revenue and earnings estimates. However, it lowered its full year revenue and earnings guidance. Its phase 3 Alzheimer's disease drug candidate results are expected in Q2 of 2023 (its accelerated approval application was denied by FDA as it needed more data). We discussed the premise of having LLY in my watch list here so let me skip over straight to gScores for trading insights.

LLY's overall gScore today is 0.52 and its micro-gScores are as listed below:

Price

0/10

RSI

2/10

Bollinger Bands

10/10

MACD

6/10

KF

9/10

OLS

5/10

MFI

3/10

Stochastic

2/5

Options data

10/10

Analysts' recommendations

10/10

Sentiments score

-5/5

  • Price micro-gScore looks low but neutral. Price fell today (at least at the time this data was collected this morning) and the number of consecutive days that it has been falling still appears to be in the bottom quantile. Current price appears to be in the bottom quantile of its last 52-week range

  • RSI is showing below average level and falling

  • Current price appears to be near its lower Bollinger band

  • MACD showed sell signal when the price was $326.07. The number of days in this -ve trend still appears to be in the bottom quantile.

  • KF is showing that current price is significantly below its "filtered" average

  • OLS model is showing that its 1Y and 5Y LS lines both have a +ve slope. This makes me feel confident in using dollar cost averaging strategy if I decide to build a position in this stock. Current price appears to be substantially below its 1Y "expected" average and slightly below its 5Y "expected" average

  • MFI is showing below average level and falling

  • Stochastic is showing below average level

  • Options data looks great. Its short ratio (<2) is very healthy and its calls/puts activity with respect to current price appears to be bullish

  • Analysts' recommendations look great

  • Sentiments score is -ve

So, it looks like LLY stock price has retreated significantly and does appear to be slightly discounted. LLY enjoys higher valuation and perhaps its Alzheimer's disease candidate might affect the stock movement Q2 onwards. If my risk appetite is low then I'd stay away from this stock at least until these results are out. I like this stock for the long-term so if I don't mind taking the risk then I'd consider building a position in this stock if/when its price stops falling and price micro-gScore is +ve. If/when that happens, I'd still buy in very small quantities until its Alzheimer's drug candidate phase 3 results come out. If the results are +ve and if still in the "buy" zone then I might consider increasing my buy quantity. If not then I'd consider taking profits if in the +ve and if in the -ve then pause buying and revisit when the dust settles. LLY seems to be liked by Wall Street as a "growth" Pharma so I wouldn't mind taking the risk if my investment horizon is multi-year. You would obviously decide for yourself.

Below are the technical analysis charts for LLY as generated by Gammath™ SPOT:


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