Okay, let’s talk about the pharmaceutical equivalent of a heavyweight boxing match that’s been playing out in your portfolio. In one corner, we’ve got Novo Nordisk (NVO), and in the other, Eli Lilly (LLY) – both duking it out in the red-hot weight-loss drug arena.
If you’ve been on YouTube lately (and let’s be honest, who hasn’t fallen down that rabbit hole), you’ve probably seen more weight-loss drug ads than cat videos. That’s because this market is absolutely bonkers right now, and these two pharma giants are basically the Coke and Pepsi of helping people shed pounds.
But here’s where it gets interesting – both stocks have been getting absolutely hammered lately. NVO is down over 26% in the past month, while LLY took a 17% beating. Ouch. So which one’s the better buy-the-dip opportunity?
Time for some nerdy math that actually makes sense (I promise). Using what’s called “discrete-state analysis” – basically a fancy way of tracking whether the market was buying or selling each week – we can see some pretty telling patterns.
For Novo Nordisk, the market bought the stock 4 times and sold it 6 times over the past 10 weeks, all while the price kept sliding downward. When this pattern shows up historically, NVO rises the following week about 62% of the time with a median gain of 2.95%. Sounds decent, right?
But here’s the kicker – there’s a 32.7% chance this could just be random market noise rather than a real signal. In trading terms, that’s like flipping a coin that’s slightly weighted in your favor, but not by much.
Enter Eli Lilly, the dark horse.
LLY had the opposite pattern – 6 buying weeks versus 4 selling weeks, yet the stock still fell. This is actually fascinating because it suggests the market was accumulating shares even as the price dropped. Classic “smart money” behavior.
When this specific pattern appears for LLY, the stock rises the following week 68.4% of the time with a median return of 2.47%. More importantly, there’s only a 19% chance this is random noise – much better odds than Novo’s coin flip.
The math suggests LLY could hit $691 over the next three weeks. For the options-savvy crowd, there’s a juicy play here: a 680/690 bull call spread expiring September 19th could net you $555 profit (that’s a 125% return) if LLY closes above $690.
Look, both companies are solid players in a market that’s not going anywhere – Americans aren’t suddenly going to stop wanting to lose weight. But if you’re picking sides in this pharmaceutical cage match, the numbers are pretty clear: Eli Lilly just delivered a statistical knockout punch.
Sometimes the best trades aren’t the obvious ones. While everyone’s focused on the flashier decline in Novo Nordisk, the smart money might already be positioning for Lilly’s comeback tour.