Herbalife Ltd., a nutrition company, develops and sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products. It offers science-based products in four principal categories, including weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition.
Take a look at the 1-year chart of Herbalife (NYSE: HLF) below with my added notations:
After hitting the $85 mark at the beginning of February, HLF fell back to the $78 area. The stock rallied from there, but stalled once again at the same $85 it hit earlier in the month. Now that HLF has broken above and held that level, $85 should provide support for higher prices.
The Tale of the Tape: A long trade could be entered on a pull back down to that level. However, a break back below $85 could negate the forecast for a higher move and would be an opportunity to get short the stock.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT