Shares of Tiffany & Co. (NYSE:TIF), which belongs to the consumer discretionary sector, flipped to the bearish side this week after a strong bearish reversal and getting rejected at a key technical resistance area. TIF stock from here looks to have plenty of downside that active investors and traders can sink their teeth into.
Consumer discretionary stocks as a sector of the S&P 500 at more than 15% remain one of the very-best-performing sectors for 2018 — and indeed over the past twelve months. In the near term, however, we have seen this group of stocks this week flip from short term bullish to short term bearish according to my proprietary measurements and on a single stock basis plenty of them look to have lower to go.
This is as good a spot as any to remind readers that stocks are a highly correlated asset class where, particularly within sectors and groups, most stocks will directionally move together. As such, before trading/investing in a stock it is imperative to understand its sector’s/group’s direction in the time frame one is interested in.
TIF Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
For some perspective, let’s start out with a look at the multiyear weekly chart of TIF stock. Here we see that the stock’s steep rally took it from the very low end of the multiyear up-trending channel in mid 2016 all the way to the upper end of the channel by June of this year. The MACD momentum oscillator at the bottom of the chart as a result of the steep last leg of the rally then quickly became record overbought.
The stock then began to stall for a couple of months and now is in mean-reversion mode.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Keeping in mind the bigger picture chart above, on the daily chart, we see that TIF stock’s yellow 50-day moving average began to change direction in August and late last week/early this week acted as a source of technical resistance. After a sharp bearish reversal in August TIF stock attempted a bounce in September, but this bounce was clearly rejected with another notable bearish reversal on October 2nd.
From here, the stock’s next downside target is $120, which is the early September lows and about another 3% lower from the daily close on Oct. 3. Below there is the red 200-day moving average, currently around $115 as another downside target.
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