Tiffany Slightly Bearish After Announcement

You may have noticed I disappeared for a few days.  I was on retreat for three days.  It was a men’s spiritual retreat.  It was nice to get away and renew for the coming year.  It was in a beautiful setting on a lake near Dallas, Texas.  Saw my first bald eagle (in the wild).  What a beautiful majestic bird.  It was pretty cool…  Alright, back to work.

There was mixed reaction after Tiffany announced it wouldn’t hit it’s targeted earnings. There were slightly more puts purchased than calls. The investment community appears to be a bit bearish on the stock. If you consider trading it, you will have to take a look and see what you think… bullish or bearish?

Options activity is brisk on high-end jewelry retailer Tiffany & Co. (TIF) this morning, with traders favoring bearishly oriented put contracts. Thus far, put volume has swelled to roughly 6,200 contracts, versus call volume of about 6,100 contracts. The result is a singles-session put/call volume ratio of 1.02, hinting at a negative sentiment skew from this speculative trading group.

The most popular option this morning is the February 70 call, where 1,550 contacts have changed hands on open interest of 2,584 contracts. Following at a close second is the February 62.50 put, which sports volume of 1,520 contracts on open interest of 2,015 contracts. Other notably active strikes include the January 2012 67.50 call, with volume of 1,313 contracts, and the January 60 put, where nearly 1,000 contracts have crossed the tape.

Obviously, traders are reacting to this morning’s news that Tiffany trimmed earnings outlook due to weaker than expected holiday sales. Specifically, CEO Michael J. Kowalski said that “sales weakened markedly in the United States and Europe during the holiday season, reflecting restrained spending by consumers for fine jewelry.” As a result, the company now sees full-year earnings of $3.60 to $3.65 per share, down from its prior outlook for earnings of $3.70 to $3.80 per share.

The brokerage community has been relatively quiet this morning, though there is plenty of room for movement once the group digests Tiffany’s announcement. For instance, the stock has attracted 10 buy ratings, 10 Holds, and just one Sell rating. Additionally, the average 12-month price target rests at about $80 – representing a premium of 33% to TIF’s current perch near $60.

Technically speaking, TIF has been in free-fall mode since early November. Today’s plunge has once again forced the stock to test round-number support near the $60 level, an area TIF flirted with on several occasions in 2011. What’s more, this weak price action has pulled the security’s 50-day and 200-day moving averages into a bearish cross. This technical formation is often a harbinger of lower prices on the horizon.

Daily TIF chart with 50-day and 200-day moving averages

See Forbes for the entire story

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