Bovespa Analysis May 2015 (D,M,Y)
Created on Friday, 01 May 2015 00:12
Written by Austin Galt
The Brazillian index, the Bovespa has finally rallied back to and surpassed my minimum target level outlined back in January. Now the coast is clear for a resumption of the downtrend. Let’s analyse the technicals thoroughly taking a bottom up approach beginning with the daily chart.
BOVESPA DAILY CHART
There is still no sign of a breakdown in the short term uptrend and I think there is still a bit more upside in store.
I have added Fibonacci retracement levels of the move down from September 2014 high to December 2014 low and I am targeting the 76.4% level at 58422 to see in the final rally high.
I have also drawn a Fibonacci Fan and its last line of resistance is the 88.6% angle and I expect the rally high to be somewhere around there.
I have drawn a horizontal line which denotes the October 2014 high at 58897 and I doubt price will trade above there.
The RSI is trending up and I would like to see it set up a bearish divergence at the final rally high.
The MACD indicator is still trending up and looks to have some further upside potential.
Finally, I have added moving averages with time periods of 100 (red) and 200 (black) which is in a bearish formation with the black line above the red line. So any bulls might wish to have a good think about that.
Now let’s skip to the monthly chart to get a look at the bigger picture.
BOVESPA MONTHLY CHART
The Bollinger Bands show price is just above the middle band and much higher it will be at the upper band. It is certainly possible for price to get back up to the upper band which is currently around 60000.
The PSAR indicator has a bearish bias with the dots above price and I doubt that resistance will be overcome by price. The dots currently stand at 61107 and will be around 60870 during the month of May.
There looks to be an ABC correction in play with the 2008 low point A and the 2010 high point B. Price now looks to be on its way to a point C low and I favour this low truncating and coming in higher than the 2008 low.
I have drawn a downtrend line from the point B high which has held all bear rallies since then. I doubt price will get back up to that trend line now let alone break above it.
As for where the point C low will be, I have added Fibonacci retracement levels of the move up from the point A low to point B high. I am targeting the 76.4% level of 39741 at the minimum. I suspect price will nudge a bit lower although not as low as the 8806% level at 34413.
The RSI has been trending up but it doesn’t look like anything special. Not much to gain from it in my opinion.
The Stochastic indicator has just made a bullish crossover but, to my eye, it looks suspect. I think this crossover is a fake out and price heading down will see this indicator reverse and make a bearish crossover shortly.
Let’s now wrap it up with the yearly chart.
BOVESPA YEARLY CHART
The Stochastic is trending down and looking bearish. There clearly looks to be further downside in store according to this indicator.
How much more downside is likely?
The Bollinger Bands show price has come back to and bounced off the middle band. It is no surprise to see price do this on its first hit. I favour more work is required around this middle band and expect price to drop under this band which currently stands around 46600.
The PSAR indicator has a bullish bias with the dots underneath price. The dots, which represent support, currently stand at 33221 and will be just under 34000 in 2016. I favour price putting in its final pullback low above this support.
Price breaking PSAR support will likely see price break below the 2008 low which stands at 29435 and is denoted by the horizontal line. While this is certainly a possibility, it is a scenario I now don’t favour.
I have added Fibonacci retracement levels of the move up from 2002 low to 2008 high and I am looking for price to clip the 50% level at 41073 before putting in the low. If price breaks PSAR support then I will turn my attention to the 76.4% level at 23729.
Personally, I am targeting around the 38000 level for final low and perhaps a whisker below. Time will tell.