Incogniteaux
Short

Reversal pattern forming in PBR

NYSE:PBR   PETROLEO BRASILEIRO SA PETROBR
There's a head and shoulders pattern forming here. There is a wide latitude for the right shoulder to form, so I'm keeping an eye on it for the next week. There's some support above, but it could drop to as far as around $9.41.
I think your looking for patterns that really don't exist. Long term charts show otherwise, it just broke higher, barely rentrench even with Oil's pull back. In addition, PBR is experiencing a resurgence within Brazil, with Lula's conviction remaining ensuring a more pro market policy within Brazil. This has been very beneficial to PBR after years of State Sponsorship causing higher expenses. Declining cost per barrel, ramp up of deep water wells, production is going up and they will beat earnings come next month. Add a reinstatement of the dividend, and $30 a share isn't off the table with a major move higher with any further uptick in oil prices or decline in the USD.
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Incogniteaux sreimer77
@sreimer77, It depends on how you do your analysis. What I'm doing here is technical analysis. You look at the chart and play the probabilities of different patterns, trends and oscillators/other indicators. What you're doing is looking at the news. Both the news and TA have their tendency to be misleading.

You might remember a couple years ago in 2015 there was an oil glut. This was supposed to send the price into a tail-spin because there was too much oil for the price to come back up before the economy suffered drastically from it. There's still an oil glut. If you'd only gone by the news you would've expected the entire market to crash as a result. It didn't. What happened was OPEC created a price fix. It's completely manipulated and imaginary at this point. The markets just decided to play along.

If you want to be good at technical analysis you shut out the news. It's a distraction. You stay away from it as much as you can so you can watch trends, market movement, etc. because it's a much more accurate expression of the psychology of the moment than any journalist's interpretation. Sometimes it works better, sometimes it doesn't, but the point is that you choose one or the other.

So you know, patterns do exist, do provide insight into probable moves, and this example I've shown is two thirds of a head and shoulders pattern. You may have heard of head and shoulders as they mention it regularly in main stream media and across media platforms and countless reputable websites (stockcharts, investopedia, option alpha, inestors.com, etc.).

Yes, it did just break upward, but tomorrow news could come and have it break downward again. That's the difference between doing it how you do and doing it how people who watch tech analysis do. But, I'm not imagining anything.
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sreimer77 Incogniteaux
@Incogniteaux, Dorsey wright has this as a BUY, which many view as superior to TA. If I recall, PBR close up on Friday? Its easy to to pick a point in time to justify your position as at some point everything will be down or up. You do realize, China consumption is up, demand is up and CAPEX has been slashed by 50% in the past 5 years. Maybe shale covers 50% of OPEC's cuts, the IEC forecast are quite rosy when it comes to SHALE. Oil field services dropped their pants on pricing to get any contract possible, now that rigs are on the uptick, so will the costs as you cannot just move people back to these regions that saw a bust in housing and other commercial activities just a few years ago. You'll have to offer even more incentives for that labor, which will=increased costs. Shale will cap out as demand picks up due to both rising Labor costs and the fact that Shale wells aren't long term produces and tend to deplete rather quickly in comparison to their peers. Venezuela production is crashing, Nigeria is always one step away from a disaster, the Mid-East is a ticking time bomb and the rate of natural disasters are on the up. Any blip to the supply side forecast will not be met with the same drastic reduction in demand, so any shocks will be to the upside. Diesel demand drives Brent, Gas WTI, so you can produce all the WTI you want, but that may not have any influence on oil prices if there is not an equal increase in Brent production, which there isn't! Macro, micro and price all need to be factored, not just pricing momentum that drives TA.
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Incogniteaux sreimer77
@sreimer77, So this isn't the beginning of a head and shoulders formation and no one should care that it is? Ok then. We should ignore chart patterns. Got it. Thanks for your input.
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Incogniteaux sreimer77
@sreimer77, Let's ignore the fact that today's chart is another step toward confirming my position, as well.
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sreimer77 Incogniteaux
@Incogniteaux, I've been watching PBR for over a decade now, and yes I cited many fundamental factors that have had a direct impact on PBR's price. These events aren't just News events. PBR dropped 50% following Dilma's re-election, TA wouldn't of helped in this situation. If Lula were running for office, that actual event would be a factor again, but thankfully it isn't. So the long term bullish reversal that took place after a decade of declines, with a bottoming process and reversal that took months to form isn't going to roll over because of some short term technical bearishness. It isn't even close to breaking support trends from this low to justify going bearish, and the most likely direction this is heading is to $30. So you can trade this technically all you want, which I do with calls around my 11k sh, but behavioral analysis is directly correlated with actual events that drive people towards fear or greed, and this now is all about greed. TA is based on price, not behaviors. And the reason the price went up is because of the behavior's resulting from Lula's conviction remaining in place. You can discount this all you want, but this trend is in tack and it will influence the price action for which all of your TA is based on. I evaluate investment decisions on all factors including technical, fundamental, behavioral and macro, and all of these are screaming BUY for PBR.
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