Tiffany & Co. (TIF) shares initially dropped after a disappointing third-quarter that was hampered by the strong U.S. dollar. Profit came in at an adjusted $0.76 a share, a slight beat to the $0.74 forecast. The big miss came with revenue printing at $938 million, much lower than the eyed $972 million. The company also cut full-year 2016 EPS -10% to -4%. The bearish market reaction was short-lived as the company provided business optimism during its conference call. The company also raised cash flow to $500 million from $400 million.
Price action on the TIF daily chart shows that prior to the earnings release, a bullish ABCD pattern formed. Point C was confirmed just ahead of the 50.0 Fibonacci retracement level of the A to B move. Point D was targeted with the 161.8% Fibonacci expansion level of the B to C leg. The key respect of this reversal pattern immediately following the earnings release could open the door for a strong advance. If the bullish rebound continues, upside may target the 100-day SMA, which currently trades around the $84.06 level. Further upside could eventually target the psychological $90 handle. If we see downward pressure return, only a break of the $73 level would revive the longer-term downward trend. Deeper support may target the $70.00 level.
The Trade: Buy TIF at $79.00, with a stop loss at $77.00 and a take profit at $83.00. The Risk/Reward Ratio is 1:3