Petróleo Brasileiro S.A. (NYSE: PBR), better known by the acronym Petrobras, seems to be gearing up for a surge as per its latest charts. The company produces and sells oil and gas in Brazil and internationally. It is engaged in prospecting, drilling, refining, processing, trading, and transporting crude oil from producing onshore and offshore oil fields, and shale or other rocks, as well as oil products, natural gas, and other liquid hydrocarbons.
Bullish Indications
#1 Ascending Triangle Pattern: The daily chart shows that the stock is currently forming an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the daily chart in purple color. Once the stock breaks out of the ascending triangle pattern with high volume, it usually moves higher. The breakout level of the ascending triangle pattern also acts as a good support level.
Daily Chart – PBR
#2 Trading Above MAs: The stock is currently trading above both its 50-day and 200-day SMA, which implies that the bulls are currently in control.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because the (+DI) line is greater than the (-DI) line and the ADX line has started to rise higher from below both (+DI) and (-DI) lines.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates bullishness.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, which is a possible bullish indication.
#6 Above Support Area: The stock has currently closed above a resistance-turned-support area, which is marked as a pink color dotted line. The stock is also trading above its 50-week SMA. All these are possible bullish indications.
Weekly Chart – PBR
#7 MACD above Signal Line: In the weekly chart, the MACD line is above the MACD signal line which is a bullish signal. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are still in control.
#8 Bullish Stoch: The %K line of the stochastic is above the %D line in the weekly chart as well, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the recommended buy level for PBR is above the price of around $12.50.
TP: Our target prices are $16.50 and $20.00 in the next 4 to 6 months.
SL: To limit risk, place a stop loss near $9.90. Note that this stop loss is on a closing basis.
Our target potential upside is 32% to 60% in the next 4-6 months.
For a risk of $2.60, the target rewards are $4.00 and $7.50. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle pattern. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
Happy Trading!
— Tara
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