Shares of Petroleo Brasileiro (PBR) doubled (yes doubled) in recent weeks, but a turnaround and a base pattern that can support a more sustained move higher will probably take more development.
In this first chart of PBR, above, we can see the strong (percentage-wise) rally in February and March. The On-Balance-Volume (OBV) line has moved just fractionally higher. Prices moved above the 50-day moving average, and the slope of that average line turned up. Prices also climbed above the 200-day average line but that move may be temporary as prices of PBR are lower this morning. Notice in the lower panel that the momentum or rate of change of prices has been slowing lately.
This longer-term chart, above, of PBR teaches a lesson I believe: when a stock declines you never know how low it can go. Here prices have lost about 90% of their value in less than two years. If history is any help, when a stock loses 80% to 90% from its zenith it can takes years for the stock to be repaired and healthy again. These kinds of big losses tell you that there are structural problems that need to be addressed. On this weekly time frame chart, we can see an up move in the OBV line and a bullish divergence in September and February between the lower lows in price and higher lows from the momentum study.
Despite rallying above the 40-week moving average line, we could see PBR retreat to the $4 area again as part of the basing process.