Herbalife Pulls Back in a Long-Term Uptrend
Buying pullbacks in stocks that are in long-term uptrends can be profitable as we demonstrated in How Markets Really Work. Herbalife (NYSE: HLF) is an example of a stock that provides a buying opportunity under that idea now.
HLF has been moving higher for more than a year and remains above its 200-day moving average, shown as a gold line in the chart above. PowerRatings can be used to identify short-term oversold conditions and HLF will start trading today with a PowerRatings of 8. Previous PowerRatings buy signals have identified timely entry signals.
PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.
In the past, buying stocks with a rating of 8 on a 5% pullback the next day and selling five days later has been profitable 72% of the time. The average winner has gained 3.9%. Other entries and exits also show high winning percentages and large average gains.
HLF should be considered a buy on a decline of 3% or more.
All data is as of the end of day on 2/12/2014.