Tiffany (TIF) shares spent all of 2015 making a steady series of lower highs and lower lows, losing 40% of their value in the process. This year they have stabilized, forming a base.
The stock now looks prepared to break out and begin moving higher.
The weekly chart shows last year's downtrend followed by the horizontal channel consolidation that has been underway since the beginning of the year. In September, the stock broke above the downtrend line and began trading in a narrowing range at the top end of the channel.
Monday's rally saw shares gap above channel resistance and close up near their highs, but the technical indications were positive going into the session. Weekly moving average convergence/divergence made a bullish crossover after the July test of the channel low and has moved above its center line, and Chaikin money flow moved above its center line in July, and has continued to track higher.
These indications reflect positive price momentum and strong buying interest.
On the daily time frame, the stock can be seen making a rounded bottom in June and July, then breaking above resistance in the $54 area and rallying up to the $74 level, which proved to be a second layer of resistance.
The trading at the top end of the channel last month compressed the price range and narrowed Bollinger bandwidth to a level that, in the past, has been followed by volatile moves.
Monday's breakout could be the start of a similar move, and the weekly channel pattern projects an intermediate-term target in the $87.50 area. Volume was well above the 50-day moving average of volume, and Chaikin money flow saw a spike up. But these readings will have to continue to improve in order to support an intermediate-term move higher.
Tiffany is a long candidate after a pullback below the $75 level, with a position size that accommodates an initial stop under the 50-day moving average. There is a 14% short interest in the stock and a covering rally could help it achieve the weekly channel price projection.