January 30

GOLd in the Rainforest


Like most tips this came from a friend of a friend.  I must admit as my friend began relating to me his friend’s windfall profits, doubling his money in the span of week, my first reaction was “Cool story bro.”  But perhaps this was a cool story, bro… and there may be something to it.  I do my best not to poo-poo any trading ideas at first because you never know what might lead to an edge on the markets.

The stock in question was (GOL) which through misunderstanding was presented to me as a gold based stock.  That did not make sense at all to me.  So a little research into the real details revealed it to be Gol Linhas Aereas Inteligentes which is one of the largest Brazilian airlines.  They are a budget airline akin to the American version of Spirit.  Hopefully the quality of their airline is superior to Spirit’s plastic fold out chairs shared next to passengers that felt it appropriate to bring their hot chicken wings and consume them elbow to elbow with you in the brief stint that reminds one to be a better religious adherent that one may not spend an eternity of damnation in a similar place.

GOL Stock Daily 1-29-2016
GOL Stock Daily 1-29-2016

So what is really going on to make GOL stock pop 100% in a day?  Is it the stock itself or perhaps some move in the market as a whole?  The answer is possibly both as on the same day, January 29th, 2016 the Brazilian stock market index rose 7%.  I knew there had to be a technical underpinning of why this occurred so I zoomed out on the time scales of charts to find an answer.

Brazilian Stock Market Index - Quarterly 1/29/2016
Brazilian Stock Market Index – Quarterly 1/29/2016

In the long timeframe the Brazilian stock market is hitting a Quarterly support.  Such a support is significant for the real long run of 5-10 years and we need confirmation but this could be the possible explanation.  The lower timeframes Monthly, Weekly, and Daily are all very bearish with few signals of a reversal as of yet.  The instruments to watch for the first sign of reversal on the Daily would potentially be the Brazilian iShares ETF; (EWZ).

EWZ ETF Daily 1-29-2016
EWZ ETF Daily 1-29-2016

For a true long term play I would like to see the Daily of the Brazilian market get price above the daily cloud.  As of right now all the instruments we are analyzing are far from this criteria.  GOL would need to clear 0.59, EWZ above 21.56, and the Brazilian Index 42896.

GOL is actually not represented in the EWZ ETF.  I searched through the components that make up the index and found the airline exposure in the company Embraer (ERJ) which experienced a 9.3% pop on the day in question.

ERJ Stock Weekly 1-29-2016
ERJ Stock Weekly 1-29-2016

ERJ has a lot of ground to cover like the rest to get bullish in the long term but the Weekly chart reveals a hold of support at the Secondary Pivot of 26.13.  It still needs many weeks of time and a rise above 30 to enter bullish territory but it could provide an investment grade opportunity to long the Brazilian market following a hint of over performance in the airline sector there specifically.


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