Petróleo Brasileiro S.A. – Petrobras (NYSE: PBR-A) seems poised for a price surge based on its latest charts. The company explores, produces, and sells oil and gas in Brazil and internationally. The company operates through three segments: Exploration and Production; Refining, Transportation and Marketing; and Gas and Power.
Bullish Indications
#1 Falling Wedge Pattern: As you can see from the daily chart, the stock has been forming a falling wedge pattern for the past few weeks. These are marked as purple color lines. The stock currently looks poised for a breakout of the falling wedge pattern. A falling wedge is a bullish pattern and once the stock breaks out from this pattern, it has the potential to move further up.
PBR.A – Daily Chart
#2 Price above MA: The price is currently above the short-term moving average of 50-day SMA, indicating that the bulls are gaining control. This is a positive indication.
#3 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color) which is typically considered bullish.
#4 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 the –DI and +DI lines. This indicates possible bullishness.
#5 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.
#6 Above Support Area: As you can see from the weekly chart, the stock has currently moved up from a support level. This level is marked as a pink color dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 200-week SMA, indicating that the bulls are still in control.
PBR.A – Weekly Chart
#7 %K above %D: The %K (blue) line of stochastic has currently crossed above the %D (Orange) line in the weekly chart. 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 shares of PBR.A above the price of around $13.10.
TP: Our target prices are $14.50 and $15.80 in the next 3-6 months.
SL: To limit risk, place stop-loss at $12.30. Note that the stop-loss is on a closing basis.
Our target potential upside is 11% to 20% in the next 3 to 6 months.
For a risk of $0.80, our target rewards are $1.40 and $2.70. 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 falling wedge pattern 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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