After a long hiatus, and as we correctly predicted several weeks ago, oil is making a comeback. Yes, commodities are tough to gauge – especially oil, which rises and falls at the behest of OPEC, which plans on cutting supply.
“We really do see some risks of oversupply in the first quarter due to lower seasonal demand for refined products and for crude oil,” said Alexander Novak, Russia’s Energy Minister (and OPEC panelist) this morning.
Regardless, we saw oil surging after setting a higher low in early October – independent of OPEC’s plans. Since then, the iPath Series B Crude Oil ETF (NYSE: OIL) is up over 14%.
And though plenty of companies in the oil industry flourished during the oil rally, others didn’t do quite as well.
Petroleo Brasileiro S.A. (NYSE: PBR), for example, missed the bullish move. That might be bad news for long-term shareholders, but it’s also a great opportunity for short-term traders.
In the daily candlestick chart above, you can see that today, after rocketing 3% upward, PBR broke through our trendline (which traces the recent standout highs). The stock finally achieved exit velocity this morning, and now, having done so, presents us with a setup to go long.
The stochastics are below 50, which, while not ideal, is good enough for our purposes, and the 50-day moving average is trending up. The most recent daily candlestick closed above the last seven candlesticks as well.
Best of all, the low from a few days ago is higher than the low of early October, when oil also set a higher low. Unlike oil prices, though, PBR plummeted for most of November.
Now, the trend is starting to shift.
Other analysts are pointing to PBR’s recent shareholder meeting, in which the company says it wants to reduce its debt. Moving forward, PBR thinks it can increase share price 45% by 2021, thanks to its new “efficiency push” alongside improved oil exploration techniques.
Whether or not the company can actually achieve 45% growth in a little over a year remains to be seen, but for now, it’s got PBR bulls jazzed-up and ready to buy – resulting in a higher low.
Because of the stock’s recent price action, it might make sense to go long above the current day’s high with a trade trigger of $15.47.
If PBR keeps rising, it could set a new higher high as well. And with OPEC insistent on making supply cuts, that could certainly happen sooner rather than later.
