Play The Uptrend In Brazil With These 3 Trades

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Includes: BBD, EWZ, ITUB
by: Real Vision
Summary

Brazilian stocks have been on fire for about a year, but investors haven’t missed the rally, according to Cerundolo Investment Research’s Guy Cerundolo.

Cerundolo likes buying the iShares MSCI Brazil ETF (EWZ) at current levels with an initial target at $54, and a stop-loss of $38.

He also likes a couple of stocks within EWZ, specifically Itau Unibanco Holding (ITUB) and Banco Bradesco (BBD).

The Brazilian stock market has been in a strong uptrend with great momentum after it emerged from a multi-year base about a year ago, Cerundolo Investment Research’s Guy Cerundolo told viewers of Real Vision’s Trade Ideas.

“Even a one-eyed technician with a crooked ruler can see that the IBOVESPA [the benchmark index of about 60 stocks that are traded on the Brazilian stock exchange] has a phenomenal long-term base and a great trend coming out of it,” he told Real Vision’s Justine Underhill.

The Trades

First off, Cerundolo likes the iShares MSCI Brazil ETF (EWZ), which has broken out of an almost 10-year downtrend. He likes buying it at current levels with an initial target at $54, which is 18% from here, and a stop-loss of $38. Cerundolo’s longer term target for EWZ is 66%.

He expects the trade to play out over six to months.

Cerundolo also has a model that drills down into the index to find the stocks with appealing relative performance to their benchmark.

Having run EWZ through that model, he also likes Itau Unibanco Holding (ITUB) and Banco Bradesco (BBD). Both stocks have broken their short-term regression trend channels on the upside, he said.

He suggests buying ITUB at current levels. His initial target price is $10.50 with a secondary target of $12, and a stop-loss at the 200 day moving average.

Cerundolo also suggests buying ticker symbol BBD at current levels with an initial target price of $11.75 and a secondary target of $14. His stop-loss for the trade would also be at the 200 day moving average.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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