Petroleo Brasileiro S.A (NYSE: PBR) seems to be poised for a price surge as per its latest charts. The company is a state-owned Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil.
Bullish Indications
#1 Flag Pattern Breakout: The daily chart shows that the stock was in an uptrend after which it started consolidating and was in a narrow range. This is a classic flag pattern and is marked on the chart in pink color. Currently, the stock has broken out of the flag. A Flag is a continuation pattern. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend (uptrend in this case).
PBR – Daily Chart
#2 Price above MAs: The price is currently above the short-term moving average of 50-day SMA as well as the longer-term moving average of 200-day SMA, indicating that the bulls are still in control. This is a positive indication.
#3 Bullish ADX: The ADX indicator shows that the +DI line is currently above the –DI line and the ADX line has started to move up from below –DI and +DI lines. This indicates possible bullishness.
#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 possible bullishness.
#5 Bullish MACD: The MACD line is above the MACD signal line in the daily chart, indicating bullishness.
#6 Trend Channel: As you can see from the weekly chart, the stock has been trading within an uptrend channel for the past several months. This is marked in the chart in purple color lines. The chart shows that the stock currently looks poised for a breakout from the uptrend channel. Once a stock breaks out from a channel, it has the potential to move further up. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are firmly in control.
PBR – Weekly Chart
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart as well. This is a possible bullish indication.
#8 Bullish MACD: The MACD line is above the MACD signal 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, you can purchase the shares of PBR above the price of around $16.30.
TP: Our target prices are $22 and $27 in the next 3-6 months.
SL: To limit risk, place stop-loss at $13.00. Note that the stop-loss is on a closing basis.
Our target potential upside is 35% to 66% in the next 3 to 6 months.
For a risk of $3.30, our target rewards are $5.70 and $10.70. 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 from the trend channel with a high volume. 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 the sector.
Happy Trading!
— Tara
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