Brazil stocks

[Chris Mac]

The EWZ is roughly at the same level now as it was when I made my first post in the thread. Although your post was made after the close on 25 March, when EWZ closed at 31.64, it's now about 4% lower than that. So I disagree with your claim that it was a bad time to short.

Your claim that "obviously Brazil is going higher and higher" is a bit hyperbolic too - the EWZ fell as low as 28.82 on 13 March.

Regardless, both your opinion and mine don't matter - I started this thread to start fleshing out ideas about potential shorts, and I've made no trades on this theme in the past month.

.

Okay it was not "a bad time to short", but IBOV is up +8% since the start of your post (and Nasdaq down 2% !).
Since December '14: 3 higher lows, 3 higher highs... Bullish for Dow !
And I will let you imagine IBOV goes above Moving Average 200 days for the coming days (yellow curb)...

Chris Mac

 

[m22au]

Okay it was not "a bad time to short", but IBOV is up +8% since the start of your post (and Nasdaq down 2% !).

Thanks Chris. As I mentioned in a previous post:

"I started this thread to start fleshing out ideas about potential shorts, and I've made no trades on this theme in the past month."

For example, I am wondering about the future of SID and GGB if iron ore prices continue to decline.

.

 

[bourseindia]

Today 52% users are recommended to sell gold.

 

[Chris Mac]

Thanks Chris. As I mentioned in a previous post:

"I started this thread to start fleshing out ideas about potential shorts, and I've made no trades on this theme in the past month."

For example, I am wondering about the future of SID and GGB if iron ore prices continue to decline.

.

SID : what do you want to do with? Be long I assume?
Because you got a nice triple bottom + a divergent rising RSI
I suppose you don't want to short a stock which is already down -72% for the last year and where all sellers already sold?

Chris Mac

 

[m22au]

SID : what do you want to do with? Be long I assume?
Because you got a nice triple bottom + a divergent rising RSI
I suppose you don't want to short a stock which is already down -72% for the last year and where all sellers already sold?

Chris Mac

Your assumption about a long bias are incorrect. By definition, stocks that have fallen 72% can still fall another 99%. If a company is going bankrupt, then there are plenty of more sellers, so "all sellers already sold" could also be incorrect.

.

 

[Chris Mac]

By definition, stocks that have fallen 72% can still fall another 99%.

No, by definition, you can just say these stocks faced a bear market.
But probabilities to go bankrupt or lose again more than 50% ? Well perhaps 5% ? 10%?
Probabilities to strongly rebound ? 20%?/30%?
Probabilities to make nothing? 50%/60%?

So shorting stocks down 77% is not a good idea because probabilities are not in your favor.

If you short a stock which make nothing, you got cost of opportunities (tons of good shorts in the Nasdaq for example !)
If you wait for a bankrupt, there are too many incertainties.
Even a dead cat bounce could kill you because you short near the lows.

But trade as you want ! Just go all-in, feel free to test your theories!
This is my last message here, good luck with your trades!

Chris Mac

 

[m22au]

No, by definition, you can just say these stocks faced a bear market.
But probabilities to go bankrupt or lose again more than 50% ? Well perhaps 5% ? 10%?
Probabilities to strongly rebound ? 20%?/30%?
Probabilities to make nothing? 50%/60%?

So shorting stocks down 77% is not a good idea because probabilities are not in your favor.

If you short a stock which make nothing, you got cost of opportunities (tons of good shorts in the Nasdaq for example !)
If you wait for a bankrupt, there are too many incertainties.
Even a dead cat bounce could kill you because you short near the lows.

But trade as you want ! Just go all-in, feel free to test your theories!
This is my last message here, good luck with your trades!

Chris Mac

We might be talking at cross-purposes. Shorting stocks down 77% can be a good idea if they are going bankrupt. I accept that they could go up due to the 77% decline being the end of the stock's decline. However, a stock that has fallen from 100 to 23 can still go to zero.

.

 

[bourseindia]

49% users are recommended to buy gold.

 

[ScalperJoe]

EWZ is attempting to break out over 36. As posted earlier, if crude can hold the 55 level (which so far it has), then it's "off to the races" with EWZ. Yes, there are lot of bank stocks in the index, and PBR is still having trouble. However, it's the Olympics that are coming next summer, and my original thesis was a rally within the year, into next summer, when all eyes will be focused on Brazil, and their economy.

I agree with both Chris Mac and m22au, these stocks HAVE faced a bear market, and yes, shorting a STOCK down 77% "can be a good idea if they are going bankrupt." However, when you play an index, you reduce the business risk and gap risk of any particular stock. Hence, the play on EWZ long, in my opinion, is valid for a swing trade/investment, while capturing the 2.27% distribution yield for waiting.

Disclosure: I'm long EWZ and will be adding on a strong monthly close. Target is the 50% retrace from the 2010 top to the recent monthly lows, which puts the price around 55.29, or around a fifty percent return from these levels. Obviously, do not take anything written on a message board as investment advice, conduct your own due diligence.

 

[m22au]

"Brazil raises rates to highest level in 6 years"
http://www.ft.com/intl/cms/s/0/20248226-eeca-11e4-a5cd-00144feab7de.html

and also a shorter summary here:
http://www.smh.com.au/business/markets-live/markets-live-investors-dump-banks-20150430-1mwi1c.html

Brazil has raised interest rates to the highest level in six years as the government struggles to regain investors' confidence and put Latin America's biggest economy back on the path to growth.

The country's central bank raised the benchmark Selic rate late on Wednesday by an expected 50 basis points to 13.25 per cent — the highest level since January 2009.

In a terse statement, the central bank said its unanimous decision to raise rates for the fifth consecutive meeting had considered "the macroeconomic outlook and perspectives for inflation", without adding further details.

While Brazil's economy is expected to contract by more than 1 per cent this year, marking the country's deepest recession for a quarter of a century, inflation has surged above the central bank's 4.5 per cent target.

In March inflation accelerated to 8.13 per cent on an annual basis. The central bank has already stated that there is a 90 per cent possibility that 2015 year-end inflation will exceed the upper limit of the target range — 6.5 per cent — for the first time since 2003.

"The 50 basis point rate hike was, in our assessment, consistent with the very challenging current and prospective inflation outlook," said Alberto Ramos at Goldman Sachs.

He added that the decision was also consistent with "abundant evidence of high and sticky services inflation, and recent statements by senior central bank officials that the progress achieved so far to drive inflation to the 4.50 per cent target by year-end 2016, albeit positive, was not yet sufficient".

***