Boston, MA 09/15/2014 (wallstreetpr) – Petroleo Brasileiro Petrobras SA (ADR)(NYSE:PBR) (Closed:16.38, Down:7.09%) kept crashing from the 22-month high at $20.94 it had hit earlier in the month, on the back of the pledge of higher fuel tax coming from the camp of Brazil’s Presidential candidate Marina Silva. It opened with a sharp gap down and kept hitting new lows for the entire session with the volume jumping up to 52.9 million against an average volume of 24.3 million. The day low of $16.11 was made close to a trend line providing support for the last 3 months and a bit of short covering may be expected from the $16 levels but the price may reach $13.50-$14.00 levels soon enough.
The weekly candle pattern has created a near perfect Evening Star with immense bearish implication in the medium term. Expect any bounce in the stock to face huge selling pressure as the panicked investors may use any opportunity to liquidate their holdings.
Petroleo Brasileiro Petrobras SA (ADR)(NYSE:PBR) is one of those stocks that never really saw the end of the bear market that had begun in 2008. The huge liquidity pump from the Fed in 2009 pushed the stock higher when it retraced about 60% of the previous fall and then resumed the long term downtrend again. Since the 2009 top at $53.46, the stock has made only lower lows and lower highs for the last five years, breaking even the 2008 bottom of $14.73.
The technical state of the stock is poor and any sustainable rally would require a multi-month base building first. Right now, with the stock price facing resistance from the long term trend line connecting the 2009 & 2011 tops, a retest of the 2014 low at $10.20 looks very probable and the bulls, at best, can expect a sideways price action in $10-$20 for 1-2 years.
The Investors are advised to get out of the stock on any corrective bounce and search for better opportunities elsewhere in the market.