Supplement your portfolio with Hebalife

• Posted by Greg Harmon
• on August 12th, 2015

“These look delicious! Who would not want to drink them, and the benefit of losing weight too? Sign me up. Oh wait, I have to buy so much every month. Ok. And I have to sign up 5 friends who also sign up 5 friends. Hmmm. But I keep some of their payments, that is good. But what if i just want to spend enough to get free shipping on what I want for me?”

“I mean, the Justice Department says this is not a pyramid scheme, right?” Whether this company has a business model that you like or not it has one thing that investors will like. A rising stock price chart. And the prognosis is for more.

Herbalife ($HLF) had a long drawn out battle with activist investor Bill Ackman through his Pershing Square Fund. This led to that investigation by the Justice Department. The company reported earnings last week and jumped afterwards. The stock had been trending higher into earnings since coming out of a base from February to March. It made a Golden Cross in May and then consolidated the move into earnings.

Now it is building a bull flag. The classic flag, with a slight pullback and declining volume has been going for 4 days. This has taken the price of the stock back into its Bollinger Bands®. It has strong momentum indicators with the RSI bullish and near 70 while the MACD is crossed up and rising. With a stop under 57.50 it offers great reward to risk with a target to the upside of 68 on a break higher.

Lots of colorful responses to my attempt at humor as lead in to the technicals in Herbalife. As a technician typically I do not care what the business model of a company is. This was the most polite:

Wes Armstrong wrote:
Mr. Harmon,

I’m not sure you will even read this, and I do not expect a response, although
that would be great. I just read your short article about HLF stock. I do
happen to be a Herbalife member. I just thought I would briefly enlighten you
to our marketing plan. You do not have to purchase a minimum amount of products
each month. Actually, you don’t have to purchase any products at all in any
given month. There is no automatic shipment of any amount of products every
month. The option to have an order automatically shipped each month is
available, but I do not personally have one person out of a few hundred in my
organization who does that. You do not have to recruit 5 new members per
month. Actually, you never have to recruit any members per month. Ever.
Herbalife does not pay me one dime for simply recruiting a new member. We are
only paid for the amount of products bought in our organization. It’s much the
same as a “Century 21” real estate broker. He doesn’t earn income from an agent
in his office unless that agent actually sells a house. The agent makes a
commission for the sale of the house. The broker earns a commission from the
sale that his agent makes. Century 21 Corporate also earns a commission from
that same sale. All I ask is that you are more informed of the business model
you write about before you actually submit your article to be posted for the
world to see.

Best Wishes,

Wes Armstrong

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