Wednesday, January 2, 2013

Herbalife (HLF), recovering, violates channel support

JAN02 2222EST. Herbalife (HLF), the nutritional supplement company, has lately been a headliner. Over the four trading days just before Christmas, the shares gave up a remarkable 43 percent over four days on news that Bill Ackman, the hedge fund manager, had become a vocal short.

Since Christmas Eve however, HLF has been staging a recovery, with price action over the subsequent five trading days forming a well-defined price channel, shown below in dashed red. The rebound has been pronounced, with the intraday peak registering over 41 percent above the December nadir.

Herbalife (HLF). Fri, Dec 21 through Wed, Jan 2. 5-minute candles.
Today's late afternoon price action has, however, violated the support line of the five-day channel. This move potentially heralds a bearish turn in the stock, but another plausible scenario, given the great steepness of the five-day channel, is for price action to drift sideways or higher within a new, less steep channel.