Lilly's Strong Support Level Signals Potential Rebound - Eli Lilly (NYSE:LLY)

Shares of Eli Lilly and Company LLY are trading higher after getting pummeled on Friday. The move lower happened after the company announced preliminary sales that were less than expected. The sales were $45 billion and investors were looking for $46 billion.

There's a good chance that the move lower is over. There is also a good chance that the stock is about to rebound. This is why our team of technical analysts and traders has made it our Stock of the Day.

As you can see on the chart, there has been support around $722.

If a stock is trending lower, there is more supply (sell orders) than there is demand (buy orders). Those who wish to sell are forced to offer their shares at a discount to draw buyers into the market. This pushes the stock into a downtrend.

At a support level, the dynamic changes. There is enough demand to absorb all of the supply. This puts a floor under the price.

Support levels can stay intact for an extended period of time because of remorseful sellers.

There are traders and investors who sold shares for around $722 in March who regretted doing so when the stock rallied soon after. Some of them decided that if they could, they would buy their shares back at the same price they were sold for.

So, when the stock returned to around the $722 level in April they placed buy orders. The large number of these buy orders caused support to form at the same price that had been support before.

Similar price action occurred in November.

Regretful traders and investors who sold around $722 in April placed buy orders to get their shares back at their selling prices. The large number of these orders created support at the level again.

As you can see, each time Lilly found this support a move higher followed. On Friday, the stock found support at the level once again. The stage may be set for another rebound.

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