Petrobras Swing Trade Opportunity (by Leaf_West)

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I have had Petrobras on my radar for a while and it was looking more and more interesting the past couple of weeks.  I know PBR's warts include that it was previously a hedge-fund darling, it has the Brazilian Gov't as its defacto CEO and that it is doing some major league elephant hunting in deep water oil plays (billions of $ to drill).

All that said, I need to take the charts at their face value and to me they are telling me to start a swing trade.  I did so this morning at yesterday's HOD $34.56.  I'm going to keep it small so I can keep it at the front of my brain and add to this trade when it shows me that it is working (i.e., takes out important levels).

 

Weekly Chart:

PBR_July 26, 2011_Weekly

Weekly charts are always important to review for swing trade candidates … PBR shows a major trend line providing resistance from the 2008 highs where it was at its zenith as a hedge fund darling.

The first test will be to see if PBR can get back up to that level of $36.00ish over the next couple of weeks.  Notice the last time it tested the line back in early 2011 … breaks are often retested.  In that case the break failed and then it performed as it should, it went to the opposite side of the price pattern.  The positive thing from that move is that it didn't seem like it wanted to break-out lower.  When this happens, the subsequent test of the upper trend line can often occur WITHOUT a retest of the new break level (just keep your mind open to a clean break).

 

Daily Chart:

PBR_July 26, 2011_Daily

The daily chart is telling me that traders should start a swing trade position NOW … we have a nice possible reversal pattern taking place:

  • Momentum divergence … momentum made a higher low (point 2 vs point 1) while price was making a lower low ($31.55 vs $32.61)
  • a clean break of a significant trend line (3-month daily trend line)
  • a successful retest of the low price of this trend … higher low ($32.11 vs $31.55)
  • 3rd-Push of the 3-Push Pattern made on the successful retest
  • Swing high of trend line break is taken out ($34.25) on a strong price thrust higher (i.e., "kick-off" move)

Price is nearing the next significant swing high level of $35.08 … getting above this level and "accepting" it will trigger me to add to my swing trade.

 

15-Minute Chart:

PBR_July 26, 2011_15min

The 15-minute chart shows more clearly the "kick-off" thrust that PBR had when it moved/reversed off its lows.  A nice consolidation pattern (rectangle) confirmed the direction of the move when it broke through the high

All-in-all PBR has all the things I like to see in a potential swing trade …. obviously all trades can have heat and/or fail, but to me this has good potential. Cheers … Leaf_West