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Robert Edwards
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Contrarian daytrading technician who specializes in micro scalping of stocks (using 1 minute bar charts), swing trading of stocks overnight, weekly stock option premium selling, pre-market and post-market psuedo market maker and stealth trading activity, and selling commodity option strangles... More
  • Now That Petrobras (PBR) Has Bottomed, How High Could It Go? 4 comments
    Mar 22, 2014 4:32 PM | about stocks: PBR

    On 1/25/14 & 2/01/14, I wrote instablog articles predicting a low price buying target of $10.17, click here and here, and did a follow-up article on 3/07/14, click here. Since Petrobras (NYSE:PBR) bottomed at $10.20 using regular session prices, or $10.18 using the aftermarket prices, missing my target by 1 to 3 cents, it has now rallied back above $11.70, confirming a temporary bottom is in. Now it is time to try and figure out how high we could climb to before rolling over again.

    Well, on a very short-term basis, as in Monday morning's opening, it never hurts that on Fast Money's Friday Halftime Report, Mike Murphy is a buyer of PBR, click here. Now lets take a look at the weekly chart of PBR to get some clues as to where we might want to take profits:

    (click to enlarge)

    On all previous rallies in PBR off major lows, PBR has always rebounded to the 50 week moving average, shown on the above chart as the blue line. Right now the 50 week moving average is $14.60. Also the last major low of $12.03 resulted in a rebound to $17.97, an increase of 49.4%. A similar rally from the recent low of $10.20, projects a rally to $15.24. I find it hilarious that Barclays is negative on the stock, but still has a one year price target of $20 on the stock. Even the bears must agree that the price PBR is trading at currently is ridiculously low. For an excellent article written by a bear, explaining the fundamental challenges PBR faces in the next few years, click here. For some balance, one might also want to read this article written by a PBR bull, click here. However, technically speaking, this stock now appears to be a winner and a buy on all dips until we move significantly higher.

    If you look at the above chart closely, you will see that PBR has a temporary top usually in the second strong week out of the bottom. Since this week we already got a long white candle, I would expect PBR to close up again this coming week, however, it should hit a temporary top sometime late this coming week that should result in a selloff of 50 to 61.8% of the move off the bottom where one should again be able to load up for the next move higher. Based on past action, PBR should now be in an uptrend move that results in a high being set within the next 8 to 16 weeks, before rolling over to possibly make another new low 15.5% lower than the recent $10.20 low. That next low, should it occur, would be $8.62, and the next rally towards $13. But for now, lets enjoy the ride to the upside and try to hold on for a move towards $15.

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

    Disclosure: I am long PBR.

    Stocks: PBR
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Comments (4)
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  • vireoman
    , contributor
    Comments (1266) | Send Message
     
    I'm glad I'm not into technicals.
    22 Mar 2014, 06:06 PM Reply Like
  • glaserdx
    , contributor
    Comments (274) | Send Message
     
    vireoman
    1) Technicals all depend on the technician. Robert Edwards is among the best practicing today. Missing a buy target by 1 to 3 cents is wildly off, right vireo?
    2) The opportunity cost is your loss.
    23 Mar 2014, 10:35 AM Reply Like
  • rxraider
    , contributor
    Comments (35) | Send Message
     
    Appreciate the technicals, RE. I'm in PBR at $10.75. Vireoman, if you are not into technicals, you're missing part of the big picture.
    23 Mar 2014, 08:43 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
     
    Author’s reply » I did some more calculations to predict the high of the week of March 24-28, based on previous rallies out of the bottom. Based on previous rallies out of major lows, it would appear we should top somewhere between $11.92 to $12.75 this week before correcting back 52 to 75% back down.

     

    But using the close of the first up week out of the bottom, which on this correction is Friday's $11.59 close, the high this week should be between $12.04 and $12.35. On Monday, we hit a high of $12.04 so I liquidated my position before the close. We closed today at $11.97 and then after the close S&P downgraded Brazil which could put pressure on PBR the rest of this week. Will have to wait and see if $12.04 turns out to be the high of the week, or PBR can rally more.

     

    Whatever the high of this week turns out to be in PBR, we should then correct back down 52 to 75% of this first up move. Once the high of this week is known, I can come up with a buy zone to load back up on PBR.
    24 Mar 2014, 11:18 PM Reply Like
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