Tiffany & Co. (TIF) reported earnings on Friday, March 22, that matched expectations, but shares continued higher to a new 2019 high of $104.20. The stock closed Monday, March 25, at $102.90, just above its annual pivot of $102.60. The stock is up 27.7% year to date and in bull market territory at 40.7% above its Dec. 24 low of $73.04. This strength is a consolidation of a bear market decline of 48% from its July 26 high of $141.64 to the Dec. 24 low. The stock is not cheap, with a P/E ratio of 21.97 and dividend yield of 2.14%, according to Macrotrends.
Following its March 22 earnings report, Tiffany was optimistic that earnings growth would improve during 2019, citing strength in its e-commerce business. The little blue box will be available at new store openings and fresh store displays.
The daily chart for Tiffany
The daily chart for Tiffany shows the 48% bear market decline from the July 26 high of $141.64 to the Dec. 24 low of $73.04. Note that a "death cross" formed on Nov. 20, when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices would follow. This tracked the stock to its Dec. 24 low.
The close of $80.51 on Dec. 31 was an important input to my proprietary analytics, and the results included a semiannual value level at $70.16, an annual pivot at $102.60 and a quarterly risky level at $123.49. Note how the annual pivot at $102.60 has been a magnet since the March 22 earnings report. The Feb. 28 close of $95.04 was another input to my analytics and resulted in my monthly value level at $79.69.
The weekly chart for Tiffany
The weekly chart for Tiffany is positive but overbought, with the stock above its five-week modified moving average of $96.38 and above its 200-week simple moving average, or "reversion to the mean," of $90.00. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 86.15 this week, up from 81.50 on March 22 and moving further above the overbought threshold of 80.00. A move above 90.00 would make the stock an "inflating parabolic bubble."
Trading strategy: Buy Tiffany shares on weakness to the 50-day simple moving average at $92.22 and reduce holdings on strength to the 200-day simple moving average at $110.45. My annual pivot should remain a magnet at $102.60.
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 quarterly, semiannual and annual levels remain in play. The weekly level changes each week; the monthly level was changed at the end of January and February.
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 being "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.