hlf

The saga of Herbalife continues. Six weeks ago I wrote about Ackman battling against Soros and Icahn, with Herbalife being stuck in the middle. Is It Time To Buy Herbalife (HLF)? The Saga Of Giant D#$*s And with the stock being up over 12% since then, the fun is just getting started.

Ackman says shutting Herbalife down is key to him

I have argued before that Ackman should have never dragged his short position into the court of public and judicial opinion. That is a big no no for any short seller and his Sin #1. And his Sin #2? Making a personal crusade out of the whole thing.

William Ackman, who has spent more than two years accusing Herbalife Ltd of running a pyramid scheme, said on Monday that shutting down the company is “one of the most important things” he can do.

This is important for a few reasons. First, Herbalife’s (HLF) stock broke out of its first resistance level. Suggesting that it wants to test its secondary resistance level at around $55. Probably soon. Second, Ackman is too committed to a particular outcome and 99% of the time this backfires. Finally, with Soros and Icahn on the opposite side of the trade, it is highly probable the stock will break out once this “witch hunt” goes away.

All in all, the likelihood of Herbalife’s stock pushing higher this year is very high.

Why You Should Never Go To War Over Your Investments Google

HLB

The saga of Herbalife (HLF) is very well known by now. On one side you have Bill Ackman, the founder and CEO of Pershing Square Capital Management LP. He believes the company is one giant Ponzi Scheme and he is trying to short the life out of this stock. On the flip side, titans such as Soros and Icahn are adding to their positions. Soros Boosts Herbalife Stake After Shares Fall

So, who is right and which way will the stock break?

There are many pros and cons when it comes to fundamental analysis of Herbalife. Their general undervaluation, their accounting practices, high % of shares shorted, etc…. I will refrain from going into an in-depth fundamental analysis in this short outlook. A simple technical overview should suffice.

I believe Herbalife (HLF) should be on your LONG to watch list. It appears the stock is trying to bottom. We are near a major support level, the stock is undervalued and there is high short interest (45% of float). If the stock is able to establish a proper bullish reversal base here and then break above $40 a share, we might see a rapid subsequent move higher. Plus, it helps to have Soros and Icahn on the same side of the trade.