Poultry Stock Might Peter Out, Signal Says

TSN's rebound off its lows could be short-lived

by Lillian Currens

Published on Jan 11, 2019 at 3:29 PM

The shares of Tyson Foods, Inc. (NYSE:TSN) were last seen trading 0.6% higher at $57.89 -- up about 16.5% from their Dec. 20 nearly three-year low of $49.77. However, some stiff resistance could cap the poultry name's gains, as a historically bearish technical alarm just sounded for TSN shares. 

Specifically, TSN stock has been in a downtrend since its late 2017 record high near $85. Amid the equity's recent rebound attempt, the shares have come within one standard deviation of their 80-day moving average, after a lengthy stretch below it. In the past two years, TSN has run up to this trendline four other times, falling over the subsequent month each time, according to Schaeffer's Senior Quantitative Analyst Rocky White. What's more, the stock suffered an average 7.31% loss one month after each signal. If history is any indicator, TSN could dip back near $53.66.

TSN Chart Jan 11

On the fundamental front, a recent trade deal between Pacific nations could hurt U.S. beef packers like Tyson. "The deal offers a rare opportunity [for Canada] to seize market share from the United States, which withdrew from the pact after President Donald Trump took office," said Reuters.

Analyst downgrades could spark headwinds too, with the majority of the eight analysts calling Tyson stock a "strong buy," with not a single "sell" on the board. What's more, the consensus 12-month price target of $69.80 represents over a 20% premium to current levels. 

On the other hand, short interest on the stock has risen almost 70% in the past two reporting periods. Nevertheless, these bearish bets now represent a slim 2.5% of TSN's total available float, suggesting the bearish camp is far from crowded.

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