The Misplaced Optimism of Tractor Supply Investors

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The Misplaced Optimism of Tractor Supply Investors

Tractor Supply (NASDAQ:) is a leading farm and ranch products retailer in the US with a market cap of just over $28B. Since 2019, the company has grown sales and earnings by a total of 74% and 98%, respectively.

So, it is not surprising that the stock has been wonder to behold in recent years. From a pandemic low of less than $64 a share, it now trades above $262 after reaching an all-time high of $290 in June.

Complacency often sets in after such long periods of prosperity. At the same time, just because something has risen in price, it doesn’t mean that it cannot rise even more. Our job is to stay as objective as possible, so we don’t start seeing patterns where there are none. When it comes to Tractor Supply stock, however, the pattern is clear as day and the bulls should worry about it.

TSCO stock has drawn a complete five-wave impulse on its weekly chart, marked (1)-through-(5), where the five sub-waves of (3) are also visible. According to the Elliott Wave principle, a three-wave correction of similar magnitude should follow. The negative phase of the cycle usually erases the entire fifth wave and then some.

If this count is correct, Tractor Supply stock can tumble to roughly $150 a share over the next couple of years. From last month’s peak at $290, that’ll be a decline of nearly 50%. Considering the company’s stellar fundamentals, this probably sounds overly-pessimistic. But no company operates in a vacuum and the US economy is clearly deteriorating. The Elliott Wave chart above indicates that this might soon become a problem for Tractor Supply investors.

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