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Herbalife Shares Up on Icahn News, 24% Drop to Follow

Head and Shoulders Pattern Points to a Target Price of $40 per Share for Herbalife
Head and Shoulders Pattern Points to a Target Price of $40 per Share for Herbalife

Upcoming Herbalife Director Nominees

Herbalife Ltd. shares are currently up 7% today on news the company will nominate 3 designees of the Icahn Parties for election to Herbalife's board of directors. Hunter C. Gary, Jesse A. Lynn, and James L. Nelson will be submitted for election on at the 2014 Herbalife annual meeting scheduled to be held on April 29, 2014. The board will continue to have 13 directors.

The Street Ratings Team Recommendation

The Street Ratings team currently has a BUY recommendation on Herbalife, symbol HLF. The team cites a number of strengths including robust revenue growth, solid stock price performance, impressive earnings per share growth, and increase in net income and good cash flow from operations. Although the company may be performing well fundamentally, the stock price has dropped from over $80 per share to $53.12 on today's 7% bounce.

Technicals Pointing to a $40 Price Target

Technically, HLF, appears to be heading much lower in the short to mid-term. Looking at a 2 year weekly chart of HLF, it is clear that last week the stock has plunged lower on a head and shoulders topping pattern. The target price of the pattern points to at least a test of the $40 level, which is about $13 lower than today's current price. Today's rally is only a small blip higher on the path to much lower prices. Perhaps at the $40 level, fundamentals will once again kick again and cause the stock to rally. For now, HLF appears to be in for a 24% drop in the coming weeks.