The ‘Sky Is Falling’ at Tyson Foods

Tyson Foods (TSN) was downgraded to underperform from neutral (sell from hold) at a major sell-side firm. This comes ahead of next week’s release of quarterly results. The stock price target is being cut to $61 from $73.

Let’s check out the charts and indicators.

In this daily bar chart of TSN, below, we can see a weak picture. Prices made a lopsided double top pattern in February and April before turning lower. The 50-day moving average line crossed below the 200-day line in June for a dead or death cross sell signal. Prices continued lower and trade below the bearishly sloped 50-day moving average line. An October bounce stopped short of the declining 50-day line in November.

The On-Balance-Volume (OBV) line has been weak since February and tells me that sellers of TSN have been more aggressive for much of the past year. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line and narrowing towards another sell signal.

In this weekly Japanese candlestick chart of TSN, below, we see a weak setup. Prices are in a longer-term decline below the declining 40-week moving average line. The weekly OBV line has been in a decline since February. The MACD oscillator is in a bearish alignment below the zero line but trying to narrow. The best we can hope for is a cover shorts buy signal.

In this daily Point and Figure chart of TSN, below, we can see a potential downside price target in the $58 area.

In this second Point and Figure chart of TSN, below, we used weekly price data. Here the downside target becomes $38.

Bottom line strategy: Bearish charts and indicators, and then the news story about their CFO being arrested after less than six weeks at the post. Chicken Little would say that the “sky is falling.” Avoid the long side of TSN.