‘No. 1 Rule’ Trade in Luxury Goods is Tiffany (TIF)

Strength in luxury retailers is a sign consumers are feeling more confident

   

Last week, I wrote about what traders consider to be the No. 1 rule of technical analysis, and that is to buy what’s making new highs. On Friday, we saw those new highs in many of the major market averages, including the Dow, the S&P 500 and the Russell 2000. Of course, the No. 1 rule of tech analysis doesn’t just apply to the indices. It also applies to individual stocks, and today one of those stocks breaking out to new highs is luxury goods retailer Tiffany & Co. (TIF).

7 15 13 tif 286x300 'No. 1 Rule' Trade in Luxury Goods is Tiffany (TIF)Now, in the interest of full disclose, I am a big fan of this company’s products, and I’ve traded the stock numerous times over the past decade (although I currently do not have a position in TIF). One reason why I’m a big fan of this company is because I never fail to find outstanding products that make a big splash for the women in my life. Let’s face it, there’s nothing that makes a woman smile more than getting a present housed in that distinctive little blue box, and that kind of appeal to its customer base is something that keeps Tiffany in the black.

Alongside me in the Tiffany fan club is analyst David Schick of Stifel Nicolaus. Schick came out today with a note that raised TIF’s rating to “Buy” from “Hold,” which also came with a price target of $92.

Schick cited Tiffany’s tendency to experiences sales increases during times of rising American consumers’ financial asset wealth as the reason for the upgrade. In other words, when the markets are up, and when consumers feel good, they go to Tiffany and splurge.

As a trader, now is the time to go shopping at TIF. The gains I suspect you can capture over the next several months will allow you to go on your own spending spree at Tiffany just in time for the holidays.

 

At the time of publication, Jim Woods held no positions in the stocks mentioned.


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