Tiffany & Co. (TIF) is a luxury jewelry retailer known for diamonds, sterling silver, china, crystal, and other personal goods. Tiffany beat its profit forecast on Tuesday but also warned that tourist spending, particularly from China, declined dramatically.
The stock closed Tuesday, June 4, at $92.51, up 14.9% year to date and in bull market territory at 26.7% above its Dec. 24 low of $73.04. The stock is also in correction territory at 15.7% below its 2019 high of $109.75 set on May 3. Fundamentally, Tiffany stock is slightly overvalued with a P/E ratio of 19.04 and a dividend yield of 2.47%, according to Macrotrends.
The daily chart for Tiffany
The daily chart for Tiffany shows its 2018 bear market. The stock peaked at $141.64 on July 26 and declined 48% to its Dec. 24 low of $73.64. Strength to its 2019 high of $109.75 into May 3 was nearly strong enough to form a “golden cross,” but that process appears to be stalling. A “golden cross” occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. Note the convergence of these moving averages at $102.23 and $102.57, respectively.
The close of $80.51 on Dec. 31 was an important input to my proprietary analytics, and the semiannual value is below the chart at $70.16. The annual risky level is around the moving averages at $102.60. The close of $105.55 on March 29 was another input to my analytics, and the second quarter risky level is $113.46. The close of $89.11 on May 31 was the most recent input to my analytics, and my value level for June is $74.47.
The weekly chart for Tiffany
The weekly chart for the Tiffany is negative, with the stock below its five-week modified moving average of $96.98 and just above its 200-week simple moving average, or “reversion to the mean” at $90.41. The 12 x 3 x 3 weekly slow stochastic reading is projected to end the week at 36.41, down from 48.61 on May 31. At its Dec. 24 low, this reading was below 10.00 at 5.29 as a stock that was “too cheap to ignore.” At its May 3 high, the reading was above 90.00 at 93.91 as an “inflating parabolic bubble.” This favored a trade from near the low to near the high.
Trading strategy: Buy Tiffany shares on weakness to the monthly and semiannual value levels at $74.47 and $70.16, respectively, and reduce holdings on strength to the annual and quarterly risky levels at $102.60 and $113.46, respectively.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of each month. The quarterly level was changed at the end of March.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently, I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an “inflating parabolic bubble,” as a bubble always pops. I also refer to a reading below 10.00 as “too cheap to ignore.”
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.