During the earlier part of this week, Goldman Sachs (GS) recommended buying the Brazilian real again after its recent slide during January. During the late part of Q3 they recommended buying the real at around 1.88/USD and indicated it would appreciate to around 1.71/USD; it did and then some and eventually bottomed out at around 1.69/USD. After weakening to around 1.72-1.74/USD, Goldman announced in mid December that it was overvalued. Then came the attack by Brazil's central bank and the imposed 2% tax. Needles to say Goldman called it right. I participated in this rally by holding VALE (VALE) and Petrobras (PBR) ADR's and therefore was exposed to the appreciating real. These were sold about a week after the announcement of 2% tax.
Yesterday, Blackrock Investments (BLK) announced that their target for the Bovespa by quarter's end would be @ 77K, which is approx 14-15% above Tuesday's close. Brazil's domestic economy is still very resilient and strong, and a good place to buy risky investments in the emerging world with China cooling off, and Russia's poor treatment of foreign capital, hopefully not a route Brazil will take further with their taxes.
Since both of these very prominent prop. trading desks have declared their bullishness on Brazil, I believe now is the time to leg into such ADR's as VALE, PBR, OGX Petroleo e Gas (OTCPK:OGXPY) and CPFL Energia (CPL).
Currently VALE is nearing its 200 day EMA, its 61.8% retracement from Sept 09, and the real/USD cross @ 1.88 when VALE was @ 19 in Sept 09, all indicators hit at around $24-25/ share. If that isn't enough support consider that Eike Batista, Brazil's Oracle (founder of OGX, MMX, etc.), started amassing a huge position in VALE @ around $23-26/share, this should provide nice support in the share price.
Note PBR and CPL have both underperformed the Bovespa in the last 12 months.
Disclosure: Long VALE ADR Shares, No positions in PBR, CPL, OGXPY.PK, MMXM3.SA, GS, BLK