Is Herbalife (HLF) dead money. Depends on the definition of “dead”.
Discussed in this article: Herbalife ( $HLF )
I want to look at Herbalife ( NYSE:HLF ). The stock had been on a tear after Carl Icahn started getting in Bill Ackman’s face, the long versus the short, the bull versus the bear and all that stuff. Well that’s run its course and the news media’s on to the next thing and market participants are too.
Look at this stock; it’s been trading sideways, we’ll say between 63.50 or so and 68.00 on the upside. But look at volume, trading volume has really dried up by quite a bit. It’s still more active than it had been back here during this last little squeeze, but certainly not like it was.
Well, as I look at this, I think for the time being this is kind of dead money, and I don’t mean that you’re going to lose your shorts by being long this stock. What I mean is, this stock is pretty extended, its quite extended above the 50-day moving average.
What’s the next catalyst, another SEC investigation that doesn’t happen because of some paper that Bill Ackman’s law firm filed? I don’t think so. Similarly, what’s going to happen that’s going to push the stock to the upside, Ichan tweets? So right now I think this stock is trading in equilibrium, so to speak.
I would suggest selling this stock if you own it. Go ahead and take some profits. And here’s why; because here’s the recent high, $68.00 was the high, that’s less than $2.00 above current levels. So what you do is, go ahead and take your profits, you may be able to buy it back down at $55.00 if the market tanks, but set a price alert here, $68.00. If this stock starts trading above $68.00 then guess what you get to do? You get to go ahead and buy it back.
Right now I view there being more risk to getting hurt by a pullback in this stock than I do on for there to be a breakout in this stock and have it go up without you, and to mitigate the risk of missing out on this upside move. All you’re doing is setting a price alert. If this stock ticks up $1.78 above where it is right now then you can go ahead and get back into the stock.