On a fundamental valuation basis, the global luxury sector is appears expensive. At 33x trailing earnings, shares of Richemont reflect it's 'blue-sky' prospects. In the short term however, the share price does appear extended to the upside and may be due a moderate pullback with the key drivers as follows:
- 7-Day RSI bearish divergence - Price extended versus both 50-EMA and 200-SMA - Price extended versus pivot - Price testing upper boundary of linear regression channel.
At current levels or better, the reward-to-risk appears attractive and thus we consider a sell/short on the expectation that a retracement occurs.
Trade Levels:
Price at publication: 18760 Sell/Short in the range of 18740c-18965c Stop-loss: 19425c Target Range: 17540c-17810c