Taking the Tarnish off Tiffany

 | Aug 01, 2012 | 11:30 AM EDT  | Comments
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Some time ago, I had a trade setup in Tiffany & Co. (TIF) that failed miserably. There was only a minor rally off the zone followed by a healthy decline into late June. This is the first time I've looked at this stock in quite a while. I started with the weekly chart to see if there was any reason to revisit the buy side. I did end up finding some price and time parameters that were present at the low in late June. The price parameters were simply a couple of Fibonacci extensions where moves tend to terminate. As far as price is concerned, the decline into June lasted 14 weeks, which was similar to a prior decline of 13 weeks. That was enough for me to investigate the work on the daily chart. Let's go there next.

 

Tiffany & Co. (TIF) -- Weekly
Source: Dynamic Trader

 

I'm not going to tell you that I had this calculated in advance, but I was able to identify a new bullish pattern off the June low along with a price cluster of support that just happened to be tested in Tuesday's session at the $52.67 to $53.05 area. This zone included a .618 retracement of the June 27 low to the July 27 high, a 1.272 extension of the July 23 low to the July 27 high, and the 100% projection of a $5.06 decline (June 20 high to the June 27 low) from the July 27 high. The session low was made at $52.92, which was directly within the zone.

 

Tiffany & Co. (TIF) -- Daily
Source: Dynamic Trader

 

So, I would have missed a day-trading entry against this zone since we already saw a healthy bounce from it, but there is still upside potential with this trade setup as target 1 off that area comes in at the $59.52 area. Target 2 comes in at $61.32. For these reasons, I would watch for either a pullback to the July 31 low or a retest of the $52.67 to $53.05 price cluster zone and watch for a buy trigger. The maximum risk can be defined below the June 27 low at $49.72. The minimum risk can be defined below the low end of the cluster at the $52.67 area.

For more information on trades and triggers, please refer here.

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