JC has really been bringing the heat with his chart game lately.
I just rewatched the monthly conference call from Monday night where he ripped through over 115 charts.
He went over a ton of valuable topics and themes, from forex to sentiment and even some risk appetite.You can sign up here and watch it. These calls are one of the best things we do at All Star Charts.
In the meantime, I stole two of my favorite charts from his slide deck to share with you.
Here’s the first one. This is a textbook topping formation in Eli Lilly $LLY with a peak marked by the old reliable magazine cover indicator from October of last year.
The timing from these headline writers is just too good sometimes. This is the millionth example. They nailed it again.
They call them the “everything drugs.” They are probably not, but let's just go with it. This excerpt is all you need to know about the vibe on the street for GLP-1 stocks.
“[GLP-1 drugs] started as treatments for diabetes and obesity. That alone would have qualified them as wonder drugs. Now they are being found to help with cardiovascular and kidney disease, too, and are being tested for use against Alzheimer’s and addiction. Researchers are even talking, in hushed tones, of their anti-ageing effects.”
Where do I even start!?
Next they’ll tell us these drugs can make you live forever. This narrative has gotten absolutely ridiculous. I’ve never seen anything like it.
Stock prices are all about investors’ expectations for the future. The market is a masterful discounting mechanism in a sense that its prices today reflect the expected news of tomorrow.
So if the present expectation is that these drugs will be taken by everyone to treat everything in the future… then how does it get any better from here?
The likelihood that these companies surprise to the downside or fall short of these lofty expectations in the future is far greater than the odds that they deliver. The market has assigned huge promises to these stock prices.
They might need to create the next wonder drug to keep up with their valuations.
So let's talk about where we go from here. And first, where we came from.
Eli Lilly is up more than 500% from its pandemic lows a few years ago. It has become one of the largest companies in the world with a roughly $700B market cap.
It’s the largest component in the Health Care index, bigger than UNH by $200B. It is larger than both Merck and Johnson & Johnson combined. The point is the market has priced this stock for perfection. The risk/reward is awful.
And if we’re wondering what the roadmap is for LLY as price churns at a key level… why don’t we look to their main competitor in the GLP-1 gold rush. Here’s Novo Nordisk overlaid with LLY.
These companies have moved together in lock-step for the last 5 years. Similar to LLY, NVO also rallied roughly 500% off its pandemic lows to last year's peak.
But it has since fallen on hard times and is in a 45% drawdown from its summer highs. The multi-year uptrend has given way to a series of lower highs and lower lows since the back-half of last year.
The path of least resistance is no longer higher for NVO. The top is in. The bubble has burst. And I think LLY follows in the coming days and weeks.
It’s been flirting with breaking down from an almost identical chart pattern. I think it’s a great short here.
JC’s charts tell you all you need to know about the GLP-1 drug story. It’s over.
