Short Squeeze In Herbalife

Herbalife

shares are trading higher by $4.50 at $46.62 in Monday's session. With no relevant news out on the issue since March 12, lets analyze the technicals and other possible explanations to the explosive rally. The rally since its March 12 close ($33.25) was instigated by the announcement that antagonist, Bill Ackman, might be under investigation for his brutal campaign against the company. Although, nothing has materialized since the announcement, the Street has used the perception of the Ackman indictment to ram the short down his throat. Thus, the catalyst for the torrid rally from $33.25 to $48.56 in today's session, massive short-covering. Mr. Ackman is not alone in his large bet against the company. As of Friday, Herbalife had a monstrous short interest of nearly 50 percent. With many of the shorts being lulled into complacency do to the long consolidation from much of 2015 between $30 and $35, the sharp rally has sent many heading for the exit. The short squeeze in the issue is being exhibited by ramp up in volume. After a huge volume spike on March 13 (10M), the issue is on track for another large volume day as it has already traded 4.3M shares vs, its 20 day average of 3.4M shares with over five hours to go in the today's session. It should be noted the current high ($48.56) coincides with its November 4 high ($48.70) and may be a key level to focus on from another bout of short covering to be triggered.