Sometimes Tiffany & Co. (NYSE:TIF) doesn’t shine bright like a diamond … like today. Shares of the luxury jewelry company are down over 7% after earnings. Despite beating earnings-per-share estimates, TIF stock missed on revenue expectations due to weaker sales in America.
For a more in-depth breakdown of the Tiffany & Co earnings performance, check out “Tiffany & Co (TIF) Beats Estimates Despite Slower Americas Sales.”
For this article, let’s focus on the impact of today’s swoon on Tiffany’s stock chart. The magnitude of today’s gap was sufficient in reversing both the short-term and intermediate-term trends for TIF stock. At $86, shares now rest beneath the 20-day and 50-day moving averages.
Fortunately for Tiffany shareholders, bears have yet to wrest control of the longer-term trend. So, no need to abandon ship just yet if you’re holding TIF for the long haul. The 200-day moving average, currently perched at $81, is a good line in the sand to watch over the coming weeks. Provided we remain above it, this earnings oopsie should be considered a mere flesh wound.
Break below that level and, well, things turn nasty.
Intraday trading this morning has been quite volatile. TIF shares have rebounded well off their lows, which is a good sign.
Divining direction on the day of a big gap is often a difficult gambit. Rather than punting, I’ll offer up a pair of trades for bulls and bears alike.
Pick Your TIF Stock Poison
Instead of going for the jugular with a straight call or put purchase, let’s hedge our bets by selling out-of-the-money credit spreads. These strategies provide a wider range of profit.
Bulls: If you think this morning’s bounce back is a positive omen for the stock, then sell the July $80/$75 bull put spread for around 50 cents. Provided the stock remains above $80 you’ll capture the max gain of 50 cents.
Bears: If you think today’s earnings worries will keep a lid on the stock for the next month, then sell the July $92.50/$95 call spread for 45 cents. You will pocket the max gain of 45 cents if TIF shares sit below $92.50 at expiration.
At the time of this writing, Tyler Craig had no positions on any of the aforementioned securities.
