Background: Herbalife Ltd. Consumer Goods | Personal Products | Cayman Islands
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.
Broader market in early stage of bearish cycle or in topping formation as a backdrop would negative for HerbaLife to have further upside
Nearest Competitors listed here (see charts in comments):
GNC Hldgs Inc (GNC)
Mannatech Inc (MTEX)
Natures Sunshine Prod Inc (NATR)
Medifast Inc (ED)
Usana Health Sciences Inc (USNA)
Most of these are in bearish cycle having topped some while back and others probably in process of topping now. This suggest that as a group they have limited upside and could correct more over next 12 months o so.
Summary of technicals:
1. Possibly having completed 5 waves up to Dec 2013 high.
2. If correct then it could have a zigzag correction of which have initial decline to Dec 2014 low and have already retraced 61.8% of that with abc minor zigzag which appears complete.
3. If correct, we could see the second leg of larger zigzag either commencing now or could shortly with downside target of $20 if it turns out to be AB=CD
4. Clear RSI divergence all the way from April 2012 high.
5. Larger pattern also appear to be forming bearish Head & Shoulder pattern (see 2 weekly charts below)
7. Most conservative downside target could be the $27 zone which is possible support of rising minor trendline and horizontal support from March 2003 high in the proximity.
8. Earnings Announcement is due on 5th May, which might or might not be the immediate catalyst for reverting the bearish cycle.
Conclusion:
With the broader market backdrop and overall the industry sector looking vulnerable Herbalife too could enter into new bearish swing. It is likely that we could anticipate a conservative target of $25 -$27 zone and if this fails to hold then extended target to around $20 area.
Action:
Consider buying Jan 2017 PUT options with strike price $15. This has the largest open interest and price on 3rd May before open is quoted $0.37 - $0.50 that is a competitive spread of $0.13 compared with other.
A fill around $0.37 or better would be preferable and would achieve 300% - 400% if the price only drops to around $40.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
DanV
danv-charting.com
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.
Broader market in early stage of bearish cycle or in topping formation as a backdrop would negative for HerbaLife to have further upside
Nearest Competitors listed here (see charts in comments):
GNC Hldgs Inc (GNC)
Mannatech Inc (MTEX)
Natures Sunshine Prod Inc (NATR)
Medifast Inc (ED)
Usana Health Sciences Inc (USNA)
Most of these are in bearish cycle having topped some while back and others probably in process of topping now. This suggest that as a group they have limited upside and could correct more over next 12 months o so.
Summary of technicals:
1. Possibly having completed 5 waves up to Dec 2013 high.
2. If correct then it could have a zigzag correction of which have initial decline to Dec 2014 low and have already retraced 61.8% of that with abc minor zigzag which appears complete.
3. If correct, we could see the second leg of larger zigzag either commencing now or could shortly with downside target of $20 if it turns out to be AB=CD
4. Clear RSI divergence all the way from April 2012 high.
5. Larger pattern also appear to be forming bearish Head & Shoulder pattern (see 2 weekly charts below)
7. Most conservative downside target could be the $27 zone which is possible support of rising minor trendline and horizontal support from March 2003 high in the proximity.
8. Earnings Announcement is due on 5th May, which might or might not be the immediate catalyst for reverting the bearish cycle.
Conclusion:
With the broader market backdrop and overall the industry sector looking vulnerable Herbalife too could enter into new bearish swing. It is likely that we could anticipate a conservative target of $25 -$27 zone and if this fails to hold then extended target to around $20 area.
Action:
Consider buying Jan 2017 PUT options with strike price $15. This has the largest open interest and price on 3rd May before open is quoted $0.37 - $0.50 that is a competitive spread of $0.13 compared with other.
A fill around $0.37 or better would be preferable and would achieve 300% - 400% if the price only drops to around $40.
Warning: This is my interpretation of price action using TA approach that I consider helps me the most but could be completely wrong. Therefore as always, please do your own analysis for your trade and risk management. You should follow this on Paper Trading Account till you feel confident to apply the skill to a live account.
DanV
danv-charting.com
