While hedge fund titans Ackman and Loeb start to square off over Herbalife as a business model, I just wanted to point out that even during times of being “raided by sharks,” price still can have long-term memory. The monthly chart of HLF below indicates that during the sharp sell-off in late-December, price found support right at prior highs from 2008-2010.
The V-shaped recovery off those lows is a promising sign for bulls, as that tends to indicate the market rejected the idea of staying down there for very long with conviction.
However, the monthly chart also does indicate a head and shoulders topping pattern now confirmed. Thus, bulls would need a sound recapture of $57 to try to negate it. As a result, if you missed the move off the lows I would view any rallies in the stock as suspect from here on out.
Although Ackman’s bearish thesis was initially castigated by the market with the V-shaped recovery, longer-term he is now in the driver’s seat for a monthly bullish to bearish reversal.
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