Tyson Foods (NYSE:TSN) is one of the biggest chicken, beef and pork processors and meat manufacturers. The company has clients in over 130 countries, including the U.S., China, Japan, the Middle East, Canada and Brazil.
If you’ve ever bought chicken wings at Wal-Mart (NYSE:WMT), chances are good it came from Tyson Foods. People have to eat even in a recession, which leads to a very consistent and reliable business model.
And indeed, even the pandemic couldn’t stop TSN’s sales growth. No wonder the stock climbed to an all-time high just three months ago.
On the other hand, a sudden jump in commodity prices and labor costs is likely to squeeze the margins of companies like Tyson Foods. That is precisely what Target (NYSE:TGT) says is already happening, sending the share price of the discount retailer plunging 25% yesterday.
Tyson Foods stock is still close to its record, but is it a safe pick in a time of rampant inflation across the board?
Well, we prefer to leave the macroeconomic analysis to the economists and focus on the Elliott Wave patterns instead. This way, we managed to predict the crashes in the S&P 500 index, SNAP (NYSE:SNAP) and Roku (NASDAQ:ROKU), just to name a few.
So, let’s see what the monthly chart of Tyson Foods stock can tell us about its future prospects.
In a monthly chart, every single price bar or candle stands for an entire month’s time. The one above visualizes Tyson Foods’ progress since the 1980s. And it doesn’t look good for the bulls.
It appears the stock has now completed a giant five-wave impulse pattern, labeled I-II-III-IV-V. Wave II took ten years to develop before the uptrend resumed in wave III, whose five sub-waves are also visible.
Wave IV looks like an expanding triangle correction, marked a-b-c-d-e, where each wave is bigger than its predecessor. It culminated in wave ‘e’ during the coronavirus panic in March, 2020.
If this count is correct, the recent rally to $100.72 a share in February, 2022, must be the final wave V. Note how neatly this pattern, which took over 40 years to form, fits between the parallel lines of a trend channel.
The bad news is that a three-wave correction follows every impulse and usually erases the entire fifth wave. In the case of Tyson Foods, this means a drop back to the pandemic lows in the low $40s.
From yesterday’s close at ~$85, this would translate into a ~50% decline. The bearish RSI divergence between waves III and V supports the negative outlook. If this analysis is correct, investors might want to skip Tyson Foods stock for the next several years.