The luxury jewelry retailer has been trading sideways since setting its post-election high of $97.29 on March 29. The low end of a trading range was set when the stock gapped lower on a negative reaction to earnings reported on May 24. The stock gapped lower that day and traded as low as $84.14, setting a trading range going into earnings to be released before the Thursday open.
The daily chart shows that Tiffany has been above a "golden cross" since Sept. 27, when the stock closed at $71.65. A "golden cross" occurs then the 50-day simple moving average rises above its 200-day simple moving average, indicating higher prices are ahead. This positive signal remains in play and the stock held its 200-day simple moving average at $87.07 on Aug. 15. What this means is be aware that a negative reaction to earnings will have the stock quickly below its 200-day simple moving average.
Tiffany closed Tuesday at $88.50 up 14.3% year to date and is up 19.5% from its post-election of $74.03 set on Nov. 9. The stock is 9% below its post-election high of $97.29 set on March 29. Tiffany is thus at risk of falling into a correction on a negative reaction to earnings.
Analysts expected Tiffany to report earnings of 88 cents a share before the open Thursday. The weekly chart below favors a negative reaction to earnings, so my focus is on the Fibonacci Retracement levels of the 48.5% bear market decline from its all-time intraday high of $110.60 set during the week of Nov. 28, 2014 and the low of $56.99 set during the week of July 1, 2016.
The Weekly Chart for Tiffany
Courtesy of MetaStock Xenith
The weekly chart for Tiffany ($88.50 on Aug. 22) is negative with the stock below its five-week modified moving average (in red) at $91.09. The stock is above its 200-week simple moving average (in green) and "reversion to the mean" at $84.77, last tested during the week of Feb. 24 when the average was $83.09.
The horizontal lines are the Fibonacci Retracement levels between the Nov. 2014 all-time high of $110.60 and the July 2016 low of $56.99. Note how the 50% retracement level of $83.81 lines up with the 200-week simple moving average at $84.77.
The key level to hold on weakness is the 38.2% retracement of $77.48, then the 23.6% retracement of $69.65. A positive reaction to earnings will have Tiffany above its 61.8% retracement of $90.14.
Investment strategy: Buy weakness to my quarterly value level of $68.34. Sell strength to my weekly, monthly and semiannual risky levels of $92.43, $96.81 and $99.55, respectively.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.