Tiffany & Co. (TIF) reported better-than-expected earnings this morning. The stock was higher in pre-market trading but it's lower this afternoon. What gives? Sure, the stock could come roaring back this afternoon and close higher, but I am playing my hand right now.
One of the first things my students of technical analysis at Baruch College learn is that the market is a discounting mechanism -- it is forward-looking. Today the news was about the earnings the last three months, but the stock market is focused on what is anticipated six to nine months ahead. I don't know what is ahead for TIF, but the collective wisdom of all the participants in the stock market is acting (selling) as if the news is not as good.
Let's see what the updated charts and indicators look like.
In this daily bar chart of TIF, above, we see prices were testing the rising 200-day moving average line for the past week or so. Prices surged to the upside this morning to test the underside of the declining 50-day moving average line. I don't know where TIF will close today, but it is possible it closes below the 200-day line. This kind of price action is definitely not positive.
The On-Balance-Volume (OBV) line has been weakening all month, telling us that sellers of TIF have been more aggressive. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish mode below the zero line.
In this weekly bar chart of TIF, above, we can see prices are testing the rising 40-week moving average line. We don't know where prices will close Friday, but we could close below the 40-week line. The weekly OBV line has been neutral for months and the weekly MACD oscillator has been weakening after a take-profits sell signal in April.
In this Point and Figure chart, we can see the first decline in August (look for the "8" on the chart) and a bounce (column of X's), but not the decline this afternoon. A decline below $87.32 will open the way for a possible decline to the $78 area.
Bottom line: If you remember that markets are forward-looking, you will be better able to manage your investments going forward. If TIF closes below the 200-day line and the 40-week average, it could decline to the $80-$78 area in the weeks and months ahead.