Petrobras, Vale surge as Bolsonaro edges Lula ahead of Brazil election runoff
As Bolsonaro gained the upper hand against Lula ahead of the Brazilian presidential runoff, related stocks such as Petrobras and Vale surged.
The current price of $21.65 is close to the 20-day high resistance level of $21.99. Therefore, the strategy is to either confirm a breakthrough of the resistance level or consider a pull-back buying approach near the support level of $20.12.
From the current price of $21.65, if it breaks above and consolidates past the 20-day high resistance level of $21.99, I will take profit at $21.99. However, if the upward momentum falters and it declines toward the support level around $20.12, I will cut losses.
RSI(14) stands at a neutral 55.7, moving averages are in a bullish alignment (right-ordered), trading volume is 0.98x the 20-day average, and the 7-day volatility (rate of change) is +2.4%.
Amid reports of Bolsonaro's advantage in the presidential runoff and an increasing trend of news surrounding the energy theme, we prepared to enter on the 20th, considering either a breakout near the resistance level of $21.99 or a pullback near the support level of $20.12. At the time, with the RSI (14) at 55.7 and moving averages in a bullish alignment, we expected a target return of 1.5%, but the actual result recorded an 11.5% return, resulting in an OVERHIT rating. Despite the positional burden of being near the resistance level, we confirmed that the convergence of sector-wide momentum and political catalysts generated much stronger upward pressure than anticipated.
Through this trade, I will keep in mind through the data that even in areas approaching resistance, the combination of an increasing trend in theme-related news and strong political catalysts can generate an overheating trend that significantly exceeds expectations. When facing similar resistance-breakout trades in the future, I will consider more actively trusting the theme's S-Class conversion rate and the strength of the news flow, thereby leaving take-profit targets flexibly open.