Trading on the Cusp: Tiffany & Co.

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Trading on the Cusp: Tiffany & Co.

Considering it’s officially Valentine’s Day, what better topic is there than jewelry? This inspired me to write about my short sell of $TIF a few weeks ago.

I love Tiffany & Co (TIF) jewelry, and I love their company’s tasteful profile even more. This didn’t, however, stop me from shorting the stock a few weeks ago before close and buying to cover Friday at open. I mentioned this on the CNBC Interview that I did last week.I love when my trading on the cusp strategy brings me high profits.

What is “Trading on the Cusp”?

Trading on the Cusp is where you place your entrance trade right before the day’s close and your exit trade right after the following day’s open.

It’s all about profiting off of the stocks price jump that occurs over night. It’s a stress free strategy because you can’t watch how the stocks price changes after the market closes. When I trade intraday, it is more stressful because I can watch the stock price every second and sometimes will exit a trade quicker than I should have based on an impulse.

Occasionally, there isn’t too much of a jump; but other times there is a nice jump to profit from.

My short sell on $TIF made me the greatest profit ever from an overnight jump. Take a look at the chart below to see my approach:

Fox on Stocks Short Sell on Tiffany $TIF

The price I shorted at was $63.12, and the price at which I bought to cover was $59.49.

How do you know when to Trade on the Cusp?

What was it that caused this ridiculous drop? I knew to short it firstly because it was highly oversold and I could sense a drop coming. But the main reason for the drop was due to the company lowering their expectations for their Q4 earnings report. It’s not even their actual earnings report…just the earnings outlook.

My goodness. These stocks and their prices are more susceptible to price swings than I thought. The earnings season mine field is filled with more bombs than I thought. Beware of not only the earnings report release date, but also the unknown earning outlooks that get released during earnings season.

Most importantly, trade on your instincts, Trade on the Cusp, and many happy returns!
-Rachel

  • rhinon

    This is literally the dumbest thing I’ve ever read on trading advice.

    So what you’re recommending is, essentially, instead of keeping your hands on the wheel and being able to control your position, that you should basically let go and blindfold yourself by simply holding overnight and HOPING that a stock goes up or down.

    Let me know how long your account lasts doing that.

  • http://teenstockboss.blogspot.com/ Grant Hosticka

    When you short sell like this, you are simply betting on the reaction to the report being posiitve or negative, not the best strategy for the long term in my opinion.

  • beatstockpromotersdotcom

    Great trade but are you are essentially saying you shorted at the exact top, and cover near the very bottom, which is nearly impossible. Any successful trader knows that pick tops and bottoms is not the way to be consistently profitable. When you are wrong on a short and the stock squeezes you hard, or you are wrong on a long and you try to catch a following knife, this is the best way to loses all of your gains. How about elaborating on the technical levels you look at and how you timed your exit.

  • Jeff

    There’s another name for this type of trading. It’s called Flipping a Coin.

  • Prince

    Not to smart! This is one of the best ways to lose it all, best advice i would give is to stay away from a stock during earnings. What she did here was gamble and luck for her it worked. Now buying and selling on technicals is the way to go but not during earnings.

  • Katie

    Prince:
    *too
    *lucky
    *Also, you have several fragments, run-on’s, and generally, you use poor grammar. If you’re going to call someone out on “not being smart”, perhaps you should make yourself not appear like an idiot.

    Also, if you read Rachel’s blog, she often discusses being wary of earnings reports and relies technical information. She just happened to showcase a good day trade. This is probably why she earns 30% annual returns. Do you?

    • jj

      You’re delusional if you think you can consistently show this type of trade to work.

    • Jeff

      Katie,
      Congrats on being a grammar nazi. But this is a poor way to trade.

      That was not a “good day trade” – it wasn’t even a day trade. That was a gamble that payed off. It could just as easily gone against her unless she had inside information into the guidance. For any aspiring traders out there – this is not a prudent way to trade. If you want to gamble, go to Vegas. This is horrible trading and nobody should engage the market this way.

  • greg

    she has a fantastic flair – like the french people call it- congratulations to her…she’s very smart, and her mom is a fantastic one

  • BobOnStocks

    Rachel, I’m starting to call BS on your blogging here. You started this blog in August last year, which focused on four to five stocks; main area of focus was technology stocks and IPO’s. Over a few months you diversify your interests into options and energy. Now you are telling your readers you have A.D.D. and happened to research Tiffany & Co earnings, noticing they lowered their expectation and the market had oversold stocks?

    I think educating people on how the stocks work is one thing, but are you ‘actually’ investing with real money? Most brokers can offer 7 – 12% annual returns, but your 6 months with 22% returns is … well … lets say interesting.

    Out of curiosity, how are you able to act and day trader, while managing part-time school, and hanging out casually with friends?

  • mike

    your all right, but she is right too you cannot possibly explain evrything in one paragraph…. you can cover your shorts if you like… some see it as professional but if you dont see it thats ok too…

  • http://www.saveinvestgive.com S. B.

    I believe that a number of studies have shown that over time the major price movements (and gains) in the stock market have largely been from close to open (i.e. overnight), rather than from open to close (i.e. intraday). This is not surprising since the major news dissemination usually comes when the markets are closed. So if you are looking to trade volatility, this does not sound unreasonable. I’m not sure I’d consider this a “stree-free” approach, however. Having news break and not be able to close your position until after the market opens actually sounds pretty stressful to me!

  • sigh

    It’s a comment section…who cares about grammar.

    Anyways people are trying to save her from losing a lot of money. If she’s 16 and shorting, she’s using a parents account with margin. Retail brokers give you 2-4x leverage, she has no control over the market and earnings and no insider knowledge. It could have easily went the other way up 5%. Let’s say she had 10k in her account and on margin 40k. It opens up +5%, she’d have lost $2000, or 20% of her actual money because of the 4x leverage.

    • fxbaja

      I doubt she is that leveraged. If 30% return for her fiscal year was acceptable, that would clue us in.

      The impact of negative gap applies whether trade was opened at close or was an existing position heading into the overnight period. The danger still comes down to being too leveraged.

      As far as covering the exposure, options are often used, but rarely for intra-day trades.

  • Aaron

    How can you say this is good or bad trading? For one the post didn’t go into details on what information she used to make the call to short $TIF. But I don’t see anything wrong with making a tactical trade on an earnings call, whether you hold it overnight for the week or longer. I think going into earnings I would have been on the short side as well, $TIF had missed earnings the last 4 times they reported I think. Going into earnings three things can happen, the stock doesn’t move, it drops, or it rises. You can make money all three ways, so using your best research and making a bet on one of those three ways is not bad trading.

  • Ryan

    I think it was a great trade because she FOLLOWED THE SIGNS. She made a very educated guess as to where she believed the stock would be moving, and was willing to risk her capital to achieve a gain she knew may be very possible. For those of you that bash this strategy, you probably don’t have the stomach to make these sort of overnight investments. Steve Cohen, one of the greatest investors on the planet, has spoken openly that some of his biggest gains ever made were on overnight holds just before QR. If you are not willing to make a risk and play everything straight you’ll will certainly stay mediocre.

  • Centurion dude

    I am impressed with the tv interview. I love these types of actions. i have done it for a long time and hundreds of thousands in the hole! and still doing it as soon as my account has a few bucks. thinking about it, fantasizing about it , and waking early (without alarm) to check on the quotes. The exciting is priceless! Keep up the habit if you can afford it :(

  • perplex

    “Most importantly, trade on your instincts, Trade on the Cusp, and many happy returns!
    -Rachel”

    So your instinct says go long S and P or short?

  • Alex

    Apparently a lot of people are so quick to judge and insult, but you missed the point. The point here was that she didn’t set herself out to do such a trade. She already knew it’s a trade worth doing (shorting the stock), and just happened to see that the stock acting a bit too perfectly according to her trade.

    Here’s the deal: towards the end of the date, you noted that the stock is heavily sold and the trend was to go lower. You know you should short. What do you do? You short. You don’t wait until the next day to do it, unless the market has already closed.

    Then the next day when the market opens, what do you see? You see the market has gone down exactly like you thought it would, so you just close.

    The thing is, when you follow the trend and you have a strong conviction what the market is going to do next, then you should be able to put your money where your conviction is, regardless of what the time window (whether it’s intraday or overnight). That’s what objectivity is about. You don’t automatically say no to a good trade just because you have to hold a position overnight.

  • William SC

    Great job on the lucky trade! I’ve also done trades like this many times, especially during the earning seasons. It’s not consistent for me, but I’d say the swing is greatly up and down. Sometimes it was handsomely rewarding, but sometime is was not. So I’m still learning, and it really takes sometime to do the prep work and researches. This kind of trades work a bit better for me than the regular trades. However, if it’s working for you, then keep doing what is working for you. Don’t worry about the noises. It’s your money, you should take full control of it. Good luck and look forward to your future tips! Thank You! :)

  • Ron

    Good job Katie on that particular stock trade and thanks for sharing even though there are a few negative people on board. For all the so called experts out there my definition of a bad trade is when you lose money not the other way around.

  • Jean

    Didn’t you mean “overbought” instead of “oversold” ? “I knew to short it firstly because it was highly oversold and I could sense a drop coming”. I wouldn’t dare shorting a “higly oversold” stock ?

  • Alaina

    Wow, you are exceptionally smart for a 16 year old, and pretty mature. I’m only 13 and I’m really learning a lot about the stalk market. I give this blog an A+

    • Alaina

      I don’t think the negative comments are necessary, people!!!!!!!

      • Well wisher

        She needs help, she can lose tons of money soon.

  • Yve

    Can someone recommend a great book for beginners? I am so interested in this topic but I don’t know where to start doing proper research. I know this young lady has a lot o money but for those of us just learning and working a regular job……please help. SMILE.

    Thanks.

  • Well wisher

    Just please be aware that professional traders make fun of you. What’s written here is very dumb indeed. Recipes for disaster and being the huge loser. Please get help.

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    Great site you have got here.. It’s hard to find quality writing like yours these days. I truly appreciate people like you! Take care!!