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TSN Swing Trade Setup

TSN (Tyson Foods Inc.) will trigger a short entry on any move below 73.80 with a suggested stop above 76.80 (or lower, using a 3:1 or better R/R if only targeting T1 or T2). T3 at 64.50 is the current final target at this time. With the trend still bullish on both TSN & the broad market, I'm going to wait for a break below the uptrend line as well as the 73.80 minor support level before triggering a short entry on TSN as to help reduce the odds of shorting into a whipsaw signal/false breakdown below the trendline. Daily & 60-minute charts:

Tyson Foods is a component of XLP (Consumer Staples ETF), which is comprised of what are referred to as "Defensive" stocks; companies that typically hold up relative to the broad market & can even flourish during economic contractions & bear markets. The recent MO (Altria Group ) short trade idea is another consumer defensive stock & I have several other potential short-side trade setups on my watchlist that are components of XLP which also might be added as official or unofficial trade ideas soon.

My thoughts & reasoning for considering defensive stocks as short trade candidates at a time when the economic indicators have shown a fairly clear trend of deteriorating fundamental in the US economy in recent quarters (i.e- a period when the stock market would normally begin to see a rotation out of growth stocks & into defensive stocks such as consumer staples & utilities) is explained here in my reply to a comment posted below the MO short trade setup recently:

As a former stock broker/financial advisor, I am very well aware that MO is considered (and historically has been) a defensive “steady-eddy” stock, something you’d put granny’s money in. I’m also aware that while short, I will be on the hook for the dividend which is about 3.4% per year but if the trade plays out, assuming that it even triggered an entry & becomes an active trade, I’m looking for a minimum drop of roughly 9% which will likely take only a couple of months at best (giving back less than 1% of those gains in the form of one quarterly dividend payment or 3.4%/4 quarters). Should MO go on to hit my final swing target for a 15% gain, I would expect that to happen well within 1 yr, most likely within 6-9 months, thereby reducing my net gain by less than 3%. Again, those figures are based on my read on the charts.
I really do appreciate your feedback & I will that I can honestly say, the current technical outlook for MO is by far the most bearish it has been for at least the last decade & just since the 2009, MO has seen at least two corrections of over 15% so I would also suggest the use of stops for those long the stock as well.
On a final note, the distortions in the financial markets created by the extreme interventions of the global CB’s are unlike anything that we’ve seen in the history of financial markets. It might seem odd that I find defensive stocks as some of the most compelling short trades over 7 yrs into a bull market already well past the historical average lifespan & while the majority of economic indicators have been trending lower, pointing to a slowing economic & possible recession on the horizon (which is usually when we start to see a rotation into the defensive names).
One of the most widely acknowledged distortions created by the Fed is that in which they’ve forced investors that typically prefer income & safety (fixed income buyers) into dividend stocks to replace that lost income, which in turn, has led to excessive valuations in many dividend stocks. In fact, I’ll post long-term chart of MO under the comment section under the MO setup which will show that MO just hit an extreme peak in it’s P/E ratio that was only seen one time before… Dec 1999 just before the 2000 market top, with MO immediately plunging 69% from that peak.
Of course, just like back then (and I was a broker at the time & clearly remember), they are saying it will be different this time as well, as the extreme valuations are justified because… (fill in the blanks).

As always, I will share the trade setups that look to offer an attractive risk-to-reward profile, a well-defined & objective entry, as well as a good chance of reaching at least the first target before exceeding the suggest stop (assuming that the trade triggers the specific entry criteria). However, it is up to each trader & investor to decide which trades mesh with their own market bias, trading style & risk tolerance. In other words, if you are not comfortable with shorting a defensive stock in a confirmed uptrend within a bull market, then by all means you show pass on the trade & patiently wait for the next setup(s) that align with your market bias and comfort level.

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Aug 12, 2016 11:40am|Categories: Completed Trades - Short|Tags: |4 Comments

4 Comments

  1. Gaucho September 9, 2016 1:01 pm at 1:01 pm

    Hi Randy @rsotc,
    TSN has moved below the 73.80 and trigger the short entry.
    Regards

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    • rsotc September 9, 2016 1:06 pm at 1:06 pm

      Darn, I just realized that I must have skipped over TSN in the short trades video that I just posted. Oh well, still looks good. Thx for the heads up!

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  2. WinBig October 7, 2016 2:58 pm at 2:58 pm

    @rsotc TSN this just hit the second target earlier and Is now sitting on support. I know many probably got stopped out but I held a little long and just booked full profits. Was getting close to a margin call and need the cash for future trade. Thanks again. I know this isn’t a perfect science but you make it very close to it.

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    • rsotc October 7, 2016 4:30 pm at 4:30 pm

      WinBig- I’m very glad to hear that you gave this one a little more room on your stops. I’ve kept the suggested stops on the tight-side in recent months due to all the whipsaw signals (false breakouts) & TSN is one of many that just slightly clipped the suggested stop to go on and play out exactly how the charts predicted. TSN also reached T3 today before snapping back up & closing right around the 2nd target level.

      Congrats on a profitable trade. Once the market starts trending again, the trades should play out (to hit their targets) faster with fewer stops hit. Have a great weekend.

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