Tiffany & Co. (TIF) – the luxury jewelry retailer known for diamonds, sterling silver, china, crystal, and other personal goods – reported better-than-expected earnings per share (EPS) before the opening bell on Wednesday, Aug. 28. The company indicated that it was struggling with slowing demand, currency volatility, and disruptions from the protests in Hong Kong. The stock traded higher pre-market to as high as $87.57 and then faded to as low as $79.52 before the open. The opening low was $78.60.

Tiffany stock closed Tuesday, Aug. 27, at $82.67, up 2.7% year to date and up 13.2% from its Dec. 24 low of $73.04. The stock is in bear market territory at 24.7% below its 2019 high of $109.75 set on May 3. Fundamentally, the stock is fairly priced with a P/E ratio of 17.79 and a dividend yield of 2.85%, according to Macrotrends.

Tiffany reported that same-store sales dropped 3% sequentially and indicated that its flagship store in New York City suffered from weak sales from tourists.

The daily chart for Tiffany

Daily chart showing the share price performance of Tiffany & Co. (TIF)
Refinitiv XENITH

The daily chart for Tiffany shows the formation of a "death cross" on Nov. 20, when the 50-day simple moving average (SMA) fell below its 200-day SMA, indicating that lower prices would follow. This led the stock to its Dec. 24 low of $73.64. Note that investors could have sold the stock at its 200-day SMA between April 24 and May 8, when the average was declining from $107.68.

The close of $80.51 on Dec. 31 was an important input to my proprietary analytics and resulted in its annual pivot, now a risky level at $102.60. This level was a magnet between March 22 and May 13. The close of $93.64 on June 28 was another input to my analytics and resulted in a semiannual pivot at $88.55. The stock has been below this level since the close on Aug. 13. New monthly and quarterly levels will be available in September. The 50-day and 200-day SMAs are $90.19 and $93.65, respectively.

The weekly chart for the Tiffany 

Weekly chart showing the share price performance of Tiffany & Co. (TIF)
Refinitiv XENITH

The weekly chart for Tiffany is negative, with the stock below its five-week modified moving average of $87.50 and below its 200-week SMA, or "reversion to the mean," at $90.92. The 12 x 3 x 3 weekly slow stochastic reading is projected to end the week at 19.62, falling below the oversold threshold of 20.00. At its Dec. 24 low, this reading was below 10.00 at 5.29, making the stock "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 Dec. 24 low of $73.04 and reduce holdings on strength to the semiannual and annual risky levels at $88.55 and $102.60, 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 annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on July 31. The quarterly level was changed at the end of June.

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.