Could this be E-Lie Lilly? Institutions Just Showed Their Hand!There's an old saying we have in the South..."A lie doesn't care who tells it." That just simply means that when a lie wants to get out and be believed as truth, it doesn't care what method is used to accomplish that. Over the years, I've made my own addition to that..."A lie doesn't care who tell it, but it has its favorites". By that, I mean that some people (or institutions, systems, etc.) seem to be the chosen favorites to spread a lie. And I've come to learn in the trading world, that Market Makers are the #1 favorite choice of the Father of Lies.
Right now, I think that's exactly where a lot of traders find themselves with Eli Lilly. The story being told is "don't worry, this is just another pullback."
Well...that's not what the chart has been telling us. A couple of weeks ago, we pointed out the first major clue when Eli Lilly broke structure on the H1 chart. At the time, we expected price to work its way down into the H1/H4 Fair Value Gap around $1,145-$1,150, eventually reaching the H4 Demand Zone between $1,127 and $1,133.
That's exactly what happened. And, now the conversation has changed. Why? Because this is no longer just an H1 setup anymore. The H4 has now produced its own Break of Structure, and more importantly, the Daily chart has joined the party. That's a much bigger deal!
On the Daily chart, the market broke its Demand Zone on July 13, and since then we've watched price begin working its way back into that broken structure. That's exactly what I expect to see when institutions are rebalancing positions before making their next decision.
Now comes the question you should be asking when these seemingly bullish bounces. Is this really a recovery... or is it simply a Return to the Source to confirm the bearish Break of Structure. Those are two very different things.
This Return to the Source could push LLY back into this Daily Demand Zone or even back as high as the BOS Supply Source, BUT, If sellers defend this retest, the fall will likely continue. The next area I'm watching is the Daily Fair Value Gap, which sits around $965-$975. There is also an internal area around 1080 - 1100 that could temporarily hold this up until Earnings. I have that marked as possible, but not likely. If that imbalance is compromised, then the larger institutional objective becomes the Daily Demand Source between approximately $850 and $870. Wow! That's a long way from where we are today, and a Big Fat Whopping Lie away from where the market wants us to think it is going.
Now, am I saying the market has to go there? Absolutely not. Markets don't owe us anything. What I am saying, though, is that the structure has changed, and when structure changes, my expectations change with it. So, could buyers prove me wrong? Of course...but it has to be structural, and not hopeful expectations.
If bulls can reclaim the broken Daily Demand Zone (get a daily close back up above ~$1215) and eventually push back into the Daily BOS Supply Source with convincing closes, then I'll gladly reassess the bearish outlook. But until then, every rally has to be viewed through a different lens. Not as proof that the bulls are back...But as a possible institutional retest before another leg lower.
I would expect for this coming week to show us some twists and turns inside of these already identified areas, mostly with the purpose of trapping over-anxious buyers and option chasers who don't understand that the trap has been set. One of the biggest mistakes traders make is confusing a bounce with a reversal. Those aren't the same thing. Price doesn't move because we hope it will. Price moves because institutions reposition capital.
Our job is simply to recognize when they're leaving footprints and act on it. Reading those footprints are never a guarantee of course, but most of the time, they tell enough of the story to expose the Lie, and get you out of trouble!
What do you think? Is Eli Lilly building a base for another run higher...
Or is this simply a pause before the next move down?
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