Here’s How To Trade Herbalife
Dr. Duru | Nov 28, 2014 10:44AM ET
Here are the follow-up details to Wednesday's tweet.
Herbalife (NYSE:HLF) has experienced a strong rally from recent lows. The stock has risen 9 out of the last 10 days on good trading volume. It is now resting just under resistance at the downward trending 50-day moving average.
Source: FreeStockCharts.com
Herbalife’s bounce runs into its first critical test: potential resistance at the 50-DMA
Adding to the intrigue in the stock is the decision of the Chairman/CEO to hold all the stock he acquired from exercising expiring stock options granted to him 10 years ago. This is essentially free money for him so the statement is not as significant as it could be. Still, it should be duly noted as a potentially positive catalyst…or at least the CEO recognized the potentially NEGATIVE press he and the company would receive from converting all this stock into cold, hard cash. From the press release on Tuesday, November 25 titled “Herbalife Chairman and CEO Increases His Personal Share Holding in the Company “:
“Global nutrition company, Herbalife (NYSE: HLF), today announced that Michael Johnson, Herbalife’s chairman and CEO, has engaged in a net exercise transaction involving 750,000 stock options that were granted to him in December 2004 and were due to expire in December 2014. Because of his complete confidence in the continued and future success of the company, Mr. Johnson has decided that he will hold all the shares issued on exercise of the option, which will be the total amount, net of those necessary to cover the exercise price and any taxes related to the transaction.”
Making this PR play more interesting and more important is the building negative sentiment aligning against the stock: it has suffered two big post-earnings gap downs and a -46% year-to-date performance.
Shares short have risen all year against HLF as bears press their bets. Shares short have returned to levels last seen in September, 2013 and represent a whopping 49% of the float!
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