Macro Monday 46 - South America Indexes Signaling Major Trend Macro Monday 46
Emerging Chart Trend in South America and Brazil
Brazil is the largest economy in South America, followed by Argentina, Chile, Colombia, and Peru.
These 5 countries together hold a huge 90% share of the South American economy.
Today we will look at index charts for South America and Brazil to get an overall initial technical picture from a price standpoint of the aggregate in these regions.
IShares Latin America 40 ETF - AMEX:ILF
The iShares Latin America 40 ETF (ILF) is a collection of the 40 largest Latin American equities by market cap.
The index is heavily weighted in Financial Services which makes up 33% of the Index. Basic materials form 19% and Energy makes up 15% of the Index allocation. Interestingly NUBank NYSE:NUS has a large c.6% holding within the index. This is a stock I hold that has performed incredibly well and I have shared many bullish charts on NU. Incredible that a relatively New Bank has grown large enough to make it into the top 5 holdings here.
The Top 5 companies in the ILF Index are:
1. Vale S.A. NYSE:VALE : 9.3% Allocation. This company is a global leader in iron ore production and the second-largest nickel producer (Basic Materials).
2. Petróleo Brasileiro S.A. - Petrobras NYSE:PBR : 7.6% Allocation. Known as Petrobras, this is a multinational corporation in the petroleum industry (Energy).
3. Itaú Unibanco Holding S.A. $ITUB. 6.5% Allocation. Itaú Unibanco is one of the largest banks in Brazil, providing a range of financial products and services (Financial Services).
4. Nu Holdings Ltd. NYSE:NU : 5.84% Allocation. Nu Holdings is a financial technology company that offers banking services and is known for its digital banking platform, Nubank (Financial Services).
5. Grupo Financiero Banorte, S.A.B. de C.V. SKILLING:GFNORTEO.MX : 5.36% Allocation. Banorte is one of the largest and most prominent financial institutions in Mexico (Financial Services)
The Latin America 40 ILF Char
SUBJECT CHART ABOVE
What jumps from this chart?
▫️ Firstly we appear to forming a long term pennant style flag from which a break up is more likely than a break down.
▫️ We have been rejected from the upper diagonal line repeatedly and if we break above this line it would be a very good indication of an initial trend change.
▫️ We have dashed underside diagonal support line warns of lower prices if broken (historically has been useful).
▫️ We are above the 200 week SMA at present and we are challenging the PointOfControl (POC) Line.
Summary South America 40 Index
As this is a long term pennant style flag from a major increase in price action in the early 2000’s, a break above the long term diagonal resistance line would be a major signal of the beginning of a new bullish trend, keep in mind that such a price move would also demonstrate a break above POC (strong trading range to hold as support). We need to watch the diagonal underside support line (dashed line) for a break lower which would be an indication of significant weakness. Either direction will give us a good signal of how the largest companies in Latin America are performing and by extension South America.
Now lets look at the largest performing country in South America, Brazil.
Brazil
Brazil is the 8th largest economy in the world and the only country in South America to make it into the top 10 world’s economies.
Brazil is the top contributor to South American nominal GDP accounting for 61% of the increase in the South American economy (Int. $264 bn). In 2nd and 3rd place are Colombia (Int. $50 bn) and Peru (Int. $25 bn) with much lower contributions.
Brazil’s Gross Domestic Product (GDP) for the year 2023 grew 2.9% and is expected to grow by c. 2% in 2024, lower is anticipated mainly as a result of the delayed effects of monetary tightening.
Brazil is considered a key financial center for South America. It has the largest economy in the region and is home to a number of significant financial institutions and stock exchanges. São Paulo, in particular, is recognized as the financial capital of Brazil and is a primary hub for international business activity in the country. Brazil is also a leading producer of a host of minerals, including iron ore, tin, bauxite (the ore of aluminum), manganese, gold, quartz, and diamonds and other gems, and it exports vast quantities of steel, automobiles, electronics, and consumer goods.
iShares MSCI Brazil ETF - AMEX:EWZ
The iShares Brazil ETF (EWZ) seeks to track the investment results of an index composed of Brazilian equities. The ETF tracks a free float-adjusted market capitalization-weighted index designed to measure the performance of the large- and mid-capitalization segments of the equity market in Brazil. All this means is that Larger companies have a bigger impact on the index’s performance.
The index is heavily weighted in Financial Services which makes up 25% of the Index. Energy at 22% and Basic materials at 16.6% of the Index allocation are 2nd and 3rd after Financial Services.
The Top 5 companies in the ILF Index are:
1. Vale S.A. NYSE:VALE 3.SA : 11.3% Allocation. This is a mining company and one of the largest producers of iron ore and nickel in the world (Basic Materials)
2. Petróleo Brasileiro S.A. - Petrobras $PETR4.SA & $PETR3.SA: 10.1% Allocation. Commonly known as Petrobras, this state-controlled company is involved in the energy sector, primarily focusing on the exploration, production, and distribution of oil and gas (Energy).
3. Itaú Unibanco Holding S.A. $ITUB4.SA: 8.3% Allocation. Itaú Unibanco is one of the largest financial conglomerates in the Southern Hemisphere (Financial Services)
4. Banco Bradesco S.A. $BBDC4.SA: 8.0% Allocation. This is another major player in the Brazilian financial market, offering a wide range of banking and financial services (Financial Services)
5. WEG S.A. $WEGE3.SA: 3.5% Allocation. WEG is an industrial company that operates globally in the electric engineering, power, and automation technology areas (Industrials).
The EWZ Chart
What jumps from this chart?
▫️ Firstly we appear to forming a long term pennant from which a break up is more likely than a break down IMO.
▫️ We have been rejected from the upper diagonal line repeatedly and if we break above this line it would be a very good indication of an initial trend change.
▫️ We have dashed underside diagonal support line warns of lower prices if broken (historically has been useful).
▫️ We have yet to break above the 200 week SMA and we are challenging the PointOfControl (POC) Line.
Summary Brazil Index
A break above the long term diagonal resistance line would be a major signal of the beginning of a new bullish trend, keep in mind that such a price move would also demonstrate a break above POC (strong trading range to hold as support). We need to watch the diagonal underside support line (dashed line) for a break lower which would be an indication of significant weakness. Either direction will give us a good signal of how the largest companies in Brazil are performing and by extension South America (as Brazil is thee major contributor to South America.
Overall
Overall IF the Latin America ETF and the Brazil ETF break out of their respective pennants to higher levels and find support prior diagonal resistance lines, the 200 weekly SMA, and the POC, this could indicate a bullish trend in South America for years to come. It would then be worthwhile to then look at companies within Brazil and South America for trading and investing opportunities.
All these charts are available on my Tradingview Page and you can go to them at any stage over the next few years press play and you'll get the chart updated with the easy visual guide to see how the South America market has performed. I hope its helpful.
PUKA
Brazilianstocks
STNE - Preparing for a Parabolic MoveBoth the chart pattern & recovering financial performance show that STNE is preparing for a parabolic move.
I was wondering why this Brazilian Fintech Company, which had stunning financial performance in the previous years, nosedived from 90 to 10 in hardly one year.
A decrease of almost 90% - that's scary for every investor. The reason I found is the bad debts - when macroeconomic situation of Brazil worsened people couldn't pay their debts. But now the STNE is recovering on the back surprising quarterly results and whopping estimates about future earnings.
Let's discuss important strengths of STNE:
TECHNICALS:
Stock entered accumulation zone in March 2022 and is swinging between price range of 12 to 7 for the last 7 months. It is forming ascending triangle but still breakout hasn't occurred and Golden Cross is also awaited. Average volume has increased but big spikes which show institutional buying are also not yet witnessed.
FUNDAMENTALS:
Recent quarter has been tremendously good for STNE. Its post quarter income increased 140% and its revenues increased 10%. One surprising aspect about STNE is that its topline growth has never stopped despite negative incomes in many trailing quarters. Company's revenues increased 110% in Trailing Twelve Months (TTM) because of increasing number of customers and inspiring performance of its core payment-processing system. Its earnings estimate of $0.35 per share represents a change of +191.67% from the year-ago number.
Another positive aspect is that Warren Buffet has this stock in his portfolio due to its high risk-reward potential.
Hence, I am keeping this stock in strict monitoring and waiting for breakout and golden cross. Another good quarter of earnings can be real fuel for its market performance.
XP. Brazilian brokerage leader.XP Inc. is a Brazilian brokerage and dealer company. It is one of the seven largest companies in the country with a capitalization of $16.8B. It is the leading low-cost financial services company in Brazil. XP Inc. gives clients access to a wide range of financial products, including fixed income securities, mutual funds and hedge funds, pension plans and life insurance, generates a large amount of media content and develops technology solutions to support its cloud and mobile applications.
The Brazilian financial market is not very developed, most of it is made up of conservative banks with inefficient financial instruments. In such circumstances, the activities of XP Inc. can be called revolutionary on a national scale. At first glance, XP Inc. is at the peak of the current investment promotion trend.
➡️ The entire movement since March 2020 visually looks like an impulse and a correction to it. The structure of the initial growth is ambiguous, and the corrective movement in wave 2 (or B) is technically decomposed into a plane. In December 2021, the decline in wave {c} reached the level of $27.5 , stopping at it with a slight flat. At the start of 2022, we saw a false breakout of this level and a return to the top with the update of the last peak (iv)of{c} and the potential for the end of the downtrend.
It is worth noting that in the area of the indicated level of $27.5 there are:
1️⃣ Corrective Fibo level 0.5 of wave 1.
2️⃣ Projection Fibo level 1.618 for wave {c}of2.
3️⃣ Strong volume zone $22-28 within the ascending wave 1.
4️⃣ The lower border of the descending pitchfork.
📌 Growth in January is like a expanding diagonal. I see a good opportunity to buy on a rollback to the area of $27-$29 .
📈 If this movement is an ABC zigzag, as a minimum target for further growth, I note the maximum level of the stock at $52 - $53 , which the price has already touched three times over the past years. If this is a start of a new impulse and we have leading waves 1-2 in front of us, then the adequate growth potential in wave 3 is at $90 , but it may turn out to be noticeably higher - the following projection levels: $120 , $142 and $190 .
➖ In theory, wave {c} may become more complicated or my initial counting may not be confirmed, then the fall will continue. Cancellation of the current scenario when the price goes below $25.5 .
The Economist - Brazil Edition - Market TOPS and BOTTOMSThe Economist - Brazil takes off
(Nov 14th 2009 edition)
The Economist - The betrayal of Brazil
(Apr 23rd 2016 edition)
The Economist - Brazil’s dismal decade
(Jun 5th 2021 edition)
If this isn't an indication to get long Brazilian equities, I don't know what is.
Never confuse education with intelligence. You can have a Ph.D. and still be an idiot!
ITUB: Out of the radar stock with great potential.Hello traders and investors! Let’s talk about ITUB here, as we can extract an important lesson from this stock. Maybe it is unfair to say it is an "out of the radar stock", as it is one of the most traded, but since it is not that popular, I'll label it as "out of the radar".
ITUB is an ADR, a Brazilian stock traded in the US (if you don’t know, I’m one of the many Brazilians here in Tradingview). It is important to look for opportunities elsewhere, because it is not only of tech stocks the market is made of!
Brazilian market is performing very well, and it is outperforming the US market. While the SPX is going up only 10% since the beginning of March, IBOV is going up 15% , and what’s more, ITUB is going up almost 40% since our group bought it!
What’s more, if you look at the weekly chart, ITUB is about to trigger a pivot point in the weekly chart, and this means the next target is around the $ 8.97, so it has more 40% to go from here.
Honestly, I believe it’ll reach there, in a few moths, but we must see a pullback in the daily chart first. The original ITUB chart (ITUB4) is having a hard time near the resistance in the daily chart:
But our ITUB already defeated the resistance, so, this is our stop-gain point from now on!
If it drops again to the 21 ema, I think it’ll be just an opportunity to buy, as ITUB has a great potential ahead, but I believe it'll take a few months to hit the $ 8.97 again. Anything around $ 5.70 is another buy for us. If you liked this analysis, remember to follow me to keep in touch with my daily updates, and support this idea if it helped you!
Thank you very much!
DECISIONS FROM MIDDLE OF COMING WEEK - SBS - 240MN - MY IDEAThank you for your likes! Very Appreciated! Please Share also to help as many people as possible. Enjoy!
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We observed that after a long run down the market have found some power to stop the fall.
The market now moves in a range. We observed that the tops are lowering while the bottoms are increasing and doing their pullbacks on an increasing support line.
Monotone movement up and down in this range will see its end during next week. Probability of seeing more explicit moves from the middle of the week. Maybe first signs will show up from Tuesday.
Decision:
-Line are broken and you follow the trend
-Wait until market reaches back the resistance line to enter Short on a pullback down or Long on a significant break up.
Question triggering the community:
- Is it the right time to buy Brazilian Share?
Leave your comments on what would be your answer?
UNCERTAIN SO TRADE WITH VOLUMES - BRFS - 240MN - MY IDEAThank you for your Likes! Very Appreciated! Please give the chance to the community to see what you like by Sharing!
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After a nice long fall, the price has stabilized and is following a very weak support line going in the upside.
There is a support, illustrated by the blue line, that has been tested few times with a major failure lately.
This opens the door to a short entry on that time. Now we are looking at the price which has broken the very weak support line.
The signal of a short direction is not significant.
The probability is higher to see the price testing again the resistance line, then different scenarios:
- The market fails again goes in a declining trend. Perfect entry for a short trade, profits in the Sort direction.
- The market supported with volumes forms a nice larger candlestick to break the resistance, top blue line. At that moment the doted support line will become a serious support line. Good entry for a long entry.
To resume:
Beware next week at the volumes and the reaction of the market towards the blue resistance line.
IBOVESPA Historical AnalysisThe following analysis is informative in a fundamentalist way.
I also highlight that in TA Bias, the best purchase occurred in the touch on EMA200 (perfect)
I highlight how political factors are clearly seen in the stock market.
Also note that EXPECTATION is the one that runs the stock market, so if you look at market expectations and how an exchange expectation will influence the market, you will make a lot more money than actually watching the news.
Remember that the Lula government begins with giving a favorable speech to businessmen, saying that Brazil needed them very much at this time (note that previously he had a hate speech against businessmen, which is why the market feared his candidacy).
We then highlight the Subprime Crisis that has affected the world globally, but while it has affected us here, it has not affected our tendency to improve internal conditions for investment and development.
Next, the highlight the change of government and as the political crisis in Dilma Government begins to precarize our national scenario, lack of confidence in the international scenario increases.
Here we clearly see the scenario of EXPECTATIONS, where the movement of Impeachment reflects in the stock market before it happens FACT, that is, the market already priced the fact before.
Note that there is political tension in the last elections, and the stock market falls as Haddad gained ground in election polls.
The market turns when the Bolsonaro takes the stab, at the same time the dollar reverses (uptrend) and falls sharply in the coming weeks.
The stock market has started to rise ever since, with Bolsonaro gaining ground in polls and winning the elections (priced earlier).
At the moment, the market suffers from risk aversion of the international investor.
Trade War has been intensified.
Trump X EDF in heavy clash.
But we have a very positive view for the Brazilian Stock Market and we may aim to 30% or more of upside momentum.