The short answer is yes. They can recommend more than one grade in reduction. See reference below.
While this answer is not what you wanted to hear, I would highly encourage you to read chapter 10 of AR 600-8-19 as it does offer other courses of action that may assist you during the process and or during an appeal. These procedures may help you stop the reduction or at least only lose one grade. Without the specifics of the situation it is difficult to tell. Most commands do not conduct these types of boards often and mistakes do happen in their implementation. I would highly encourage you to work closely with TDS to ascertain if proper procedures were followed.
Be aware that this reduction may put you past your Retention Control Point and the unit may attempt to separate you from service under AR 601-280.
Special Note: I was not able to review FM 27-1. If it contains a statement that is in conflict with AR 600-8-19 then TDS may be able to argue conflicting standards and have the decision thrown out or reduced.
AR 600-8-19 Para 10-8h(5)j, page146: “The board may recommend reduction of one or more grades, retention of current grade, or reassignment in grade.”