Petrobras (PBR) is one stock we’re monitoring closely in 2012. One of the largest company’s in world, its stock has has moved to the upper bound of the well defined two month trading range between $24 and $28.50. The stock was extremely difficult for dollar based investors and traders in 2011 losing more than 1/3rd of its value in dollar terms, which included a 10 percent decline in the local currency.
The stock is subject is currency and political volatility as the Brazilian government is the majority shareholder. It looks to be good value at $28 (see here) and the BOVESPA recaputred its 200-day moving average in today’s trading. Petrobras was up over 2 percent in local trading.
PBR is a bit overbought in the short-term with a 14-day RSI at 70.21 and is also pressing up against some key levels.: 1) the 38.2 perecent fib retracement of the 51 percent March-October decline at $29.16; 2) the $29.49 August high; and 3) the 200-day moving average at $29.91. We have a small position and will be buying on any weakness until the market proves us wrong and always with a stop. We like cheap oil!
PBR hurt us a couple of times last year as we tried to catch the falling knife, but one of our goals of the New Year, however, is to overcome our availability biases. In fact, the top performing markets, sectors, and stocks of the first two weeks of the new year are those that hurt the most in 2011. The pain of owning them in 2011 resulted in the initial under allocation and hence the ramp at the beginning of this year. Stay tuned.