Tyson Foods Weekly Chart Negative After Revenue Miss - Here's the Trade

Buy Tyson Foods on weakness to its reversion to the mean at $70.32 and reduce holdings on strength to its 200-day simple moving average at $84.24.
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Tyson Foods, the world’s No. 2 food processor, reported quarterly earnings on Thursday and matched earnings estimates but missed on revenue. 

The stock set its all-time intraday high of $94.24 on Jan. 13, then a day later failed to hold its semiannual pivot at $92.72. By the week that ended on Jan. 24, its weekly chart became negative.

Buy Tyson Foods on weakness to its reversion to the mean at $70.32 and reduce holdings on strength to its 200-day simple moving average at $84.24.

While it matched earnings expectations, the Springdale, Ark., company warned that challenges lie ahead. The details of the earnings report are available on this coverage reported by TheStreet.com.

Shares of Tyson are in Jim Cramer’s charitable trust portfolio. In his Lightning Round Wednesday evening on "Mad Money," he set an $80 price as the trigger for a trade. This level was crossed in Thursday morning trading.

Fundamentally, the stock is reasonably priced. Its p/e multiple is 15.4 with a dividend yield of 2%, according to Macrotrends.

At this morning's low of $78.48, the stock was down 14% year to date and in correction territory 17% below its all-time intraday high of $94.24, set on Jan. 13. 

The stock is still in a bull market as it's 58% above its Dec. 26, 2018, low of $49.77.

Since the end of 2016 the stock has been quite volatile. From a cycle low of $57.20 set during the week of June 2, 2017, to the high of $84.65 set during the week of Dec. 8, 2017, the stock gained 47%. From this high to the Dec. 12, 2018, low the stock had a bear-market correction of 41%.

The Daily Chart for Tyson Foods

The Daily Chart For Tyson Foods

The Daily Chart For Tyson Foods

Courtesy of Refinitiv XENITH

The daily chart for Tyson shows that the rally since Dec. 26. 2018, began with a key reversal day. The stock set its cycle low of $49.77 and closed the day at $52.06, above the Dec. 24, 2018, high of $52.

The next bull-market signal was the formation of a golden cross confirmed on March 21, 2019. This signal occurred when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices would follow. 

This followed the stock to its all-time intraday high of $94.24, set on Jan. 13. The negative reaction to earnings this morning included a price gap below its 200-day SMA at $84.24, ending the golden cross.

The Dec. 31 close of $91.04 was an important input to my proprietary analytics. The annual risky level for 2020 is above the chart at $96.03. The semiannual pivot at $92.72 failed to hold on Jan. 14. The first-quarter value level lags at $68.57.

The close of $82.63 on Jan. 31 was an input to my analytics and the risky level for February is $94.87. The risky level for this week is $86.95.

The Weekly Chart for Tyson Foods

The Weekly Chart For Tyson Foods

The Weekly Chart For Tyson Foods

Courtesy of Refinitiv XENITH

The weekly chart for Tyson Foods is negative, with the stock below its five-week modified moving average of $86.

The stock is above its 200-week simple moving average, or reversion to the mean, at $70.32. This stock has been above this reversion to the mean since the week of March 15, 2019, when the average was $62.58.

The 12x3x3 weekly slow stochastic reading is projected to decline to 45.65 this week from 60.25 on Jan. 31.

Trading Strategy: Buy weakness to the reversion to the mean at $70.32. Reduce holdings on strength to its 200-day simple moving average at $84.24. 

How to use my value levels and risky levels:

The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Quarterly, semiannual and annual levels remain on the charts. Each uses the past nine closes in these time horizons.

Monthly levels for February were established based on the Jan. 31 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.