Eli Lilly and Company (LLY) shares rose more than 3% during Wednesday's session after Morgan Stanley upgraded the stock from Equal Weight to Overweight and raised its price target from $116 to $150 per share. Analyst David Risinger cited strong earnings growth potential and significant pipeline optionality from its small size and low margins. Given Eli Lilly's strong R&D leadership, Risinger believes that the market underappreciates the company's long-term growth prospects.

In separate news, the company announced the start of a long-term study, TRIUMPH, evaluating the effectiveness of Emgality (galcanezumab-gnlm) compared to other preventative treatments for migraine among people switching from a different treatment or starting a new prescription treatment. The 2,850-subject trial will track prescriptions and treatment choices among migraine sufferers over a two-year time frame. Emgality generated $47.7 million in worldwide revenue during Q3 2019.

Chart showing the share price performance of Eli Lilly and Company (LLY)

From a technical standpoint, Eli Lilly stock broke out sharply higher to test its highs made earlier this year. The relative strength index (RSI) moved further into overbought territory with a reading of 86.63, but the moving average convergence divergence (MACD) remains in a bullish uptrend. The stock could also experience a near-term golden cross – or a bullish crossover of its 50- and 200-day moving averages. These indicators suggest that the stock could see some near-term consolidation before extending its move higher over the coming sessions.

Traders should watch for some consolidation near its prior highs of around $130 over the coming sessions. If the stock breaks out, traders could see a move to fresh 52-week highs. If the stock breaks down lower, traders could see a move toward R2 resistance at $123.81 or trendline support near $120. The bullish technical and fundamental backdrop suggest that the intermediate-term trend will remain higher.

The author holds no position in the stock(s) mentioned except through passively managed index funds.