HLF is one of the stocks on my short list that popped up in last week's scan.
While I'd never want to go up against Carl Icahn, shorting a stock he's an activist investor in, his Q1 13-F shows he may not be quite the activist investor in HLF not that he laid out Bill Ackerman which seems that was one of his main motivations as Ackerman was short HLDF and telling the world about it in a 300 page research piece detailing how HLF is a multi-level marketing scam. Ackerman and Icahn got in to a screaming match on CNBC and not too long after, Icahn went in to HLF and squeezed Ackerman.
In any case, according to the Q1 13F for the period ending MArch 31st, Icahn brought up positions like AAPL by 60% (we already know he's been an activist there), he brought up HLF only by 1%, of course the released 13F was 45 days old before anyone saw it so who knows what the positions are at now.
As an aside, I described (I believe around the time Icahn was accumulating AAPL) a process by which you don't have to disclose a position on a 13F if it may hurt your ability to fill out that position, Warren Buffet did it with IBM (it seems a lot of people don't know this), well Icahn also disclosed a previously undisclosed EBAY position, so yes, you can go at least 1 quarter without disclosing your full holdings on a 13F.
In any case, the point is, 1% isn't much and 45 days later, well... it may have just been a symbolic purchase to say, "I'm still in HLF" when in fact he may have been moving out the last 45 days, someone seems to be.
Take a look at the charts,
This is the scan I mentioned from last week showing HLF with a sell signal, note the previous buy/sell signals were all pretty much right on, this one is a bit larger than the rest and I think I know why.
This daily chart looks like a H&S top, its neckline can be drawn a couple of different ways so I just split the difference. We have the Left Shoulder, the HeAd which is the first and most advantageous place I prefer to short a H&S top, then the right shoulder and finally the break below the neckline
which I will never short, but this is EXACTLY where retail will, then (as one of our concepts), there's a "Volatility shakeout", which is a sort of head fake run because the H&S is still valid, it's just meant to knock out all the new shorts that entered on the break below the neckline, which is exactly why I won't short a break of the neckline, that's what the retail herd does. The "Volatility Shakeout" back above the neckline where retail place their stops as they expect the broken neckline to act as resistance, fails and forces them to cover which allows institutional players to either sell more of HLF at favorable prices and in to the demand of a short squeeze or allows them to sell short at a much more favorable level with plenty of demand to absorb their short selling from retail shorts who are buying to cover on the break back above the neckline. THIS IS THE THIRD AND LAST PLACE I'LL SHORT A H&S TOP.
We do have to use volume confirmation to be sure this is a true H&S top, these aren't random price formations, they have been around well over a century and that's because human emotion and logic never change, thus the pattern is still with us, but the things that create the pattern (which are rooted in the human element) must be confirmed and volume is one of the best ways to do it.
A short entry at this area is also low risk as you can put a stop just above the recent reaction high (shakeout high) or above the head of the pattern, depending on your risk tolerance, but it's much better risk positioning than shorting below the neckline, especially when we know that the probabilities are VERY HIGH, that these shorts will be shaken out.
At the left shoulder "1" volume decreases in to the rally, this is what we want to see. At the decline from the top of the head at "2" volume increases substantially, this again is what we want to see. At "3", the break of the neckline, volume increases as shorts pile in with their orders sitting just below the support of the neckline. Finally at "4", our shakeout of new shorts, volume drops off substantially which is not part of confirmation of a H&S top as this is not something you'll see in a textbook, this is something Technical Analysis hasn't caught on to even though this same process has been playing out for a decade.
This is the weekly 3C chart, you can see distribution at the 2012 high, I wouldn't expect to see any significant distribution in this pattern on a long, strong chart like this when people know Icahn is in the stock, but with a token 1% increase, it almost seems like he may be trying to make people think he's still interested in HLF, but 45 days later by the time the 13F was released, a lot can happen and since then, even more.
On a more detailed 4 hour chart the head is not seeing the kind of 3C confirmation it should for a price move like that and after the Q1 reporting period was over, we see a larger negative divegrence on the volatility shakeout at the far right, this would have been after the 13F release.
A 2 hour chart is exceptionally strong for underlying signals, not as strong as the 4 hour above, but it shows in even sharper detail the 3C negative divergence at the shakeout run.
As does the hourly chart...
The 10 min chart as well as the 15 min
And a very sharp, strong recent move on the 5 min chart.
I consider this a longer term position, more like a core short. I'm going to enter a tracking short position now though there may be a little better entry, I don't think it's of much significance, I think the charts and probabilities here as well as where we are in the process are of significance.
The price implied target is nearly -50%, around $29-$30 longer term.
