Tiffany & Co. (NYSE: TIF)

Tiffany & Co., through its subsidiaries, designs, manufactures, and retails jewelry worldwide. Its jewelry products include fine and solitaire jewelry; engagement rings and wedding bands to brides and grooms; and non-gemstone, sterling silver, gold, and metal jewelry. The company also sells timepieces, leather goods, sterling silverware, china, crystal, stationery, fragrances, and accessories. In addition, it wholesales diamonds to third parties. The company offers its products through retail sales, Internet and catalog sales, business-to-business sales, and wholesale distribution. As of January 31, 2015, it operated 295 stores, including 122 stores in the Americas, 73 stores in the Asia-Pacific, 56 stores in Japan, 38 stores in Europe, 5 stores in the United Arab Emirates, and 1 store in Russia.

Take a look at the 1-year chart of Tiffany (NYSE: TIF) below with added notations:

1-year chart of Tiffany (NYSE: TIF)

After a big drop in January, TIF started trading sideways over the following 4 months. The stock then jumped higher in May and has traded sideways, again, since. While in the most recent sideways move, the stock has formed a common pattern known as a rectangle. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern.

TIF’s rectangle pattern has formed a resistance at $95 (red), which has also been key to the stock in the past, and a $90 support (green) that was a key resistance during TIF’s previous sideways move. At some point the stock will have to break one of the two levels, and if the $95 resistance breaks, traders should look for a run back up to the $100 level (blue).

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The Tale of the Tape: TIF is trading within a rectangle pattern. The possible long positions on the stock would be either on a pullback to $90 or on a breakout above $95. The ideal short opportunity would be on a break below $90.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Follow me on Twitter: @cmtstockcoach