Is Bovespa at the end of its Honeymoon?

2月7日

The Sao Paulo stock market, or Bovespa, is characterized by its strong presence in defensive sectors such as banking and insurance companies, as well as in commodity producers such as VALE or PETROBRAS, and energy companies such as ELETROBRAS or EQUATORIAL ENERGIA. This is common in a country with a solid export base of raw materials and foodstuffs such as AMBEV, in addition to a robust domestic market. Brazil has established itself as a leader in the southern cone of Latin America in the export of various products, from food and raw materials, to vehicles, textiles, and chemicals. Its domestic consumption has been accompanying this growth by increasing the number of products listed in the index. This high export has been instrumentalized with an export surplus in December of US$ 300 billion in its trade balance, accompanied by the honeymoon of raw materials and food that has facilitated its increase in profits for these companies, which has been strongly reflected in the index up to this date, especially after the great Sino-Brazilian alliance for the export of the agricultural, mining and industrial sector.

The Bovespa index started its uptrend in March 2023, with technical bounces in October and December (in the run-up to Christmas). However, it has since experienced a downward correction, settling at around 128.985 points after reaching a high of 134.520 points.The RSI divergence indicates an overbought movement at 76.19%, suggesting the possibility of a bullish extension, although it is likely that it will first look for the limits of the lower part of the bullish channel.

In summary, the future of the Bovespa is highly dependent on economic results in exports and commodities.If they are favorable, the index could continue its uptrend towards 139,922 points. However, if the results disappoint, we could see a correction towards 122,427 points, with a current psychological support zone at 112,311 points. The middle zone of the previous support channel is around 118.749 points, while the current level is at 128.766 points. So at this point we have great opportunities for pronounced movement entries throughout this month and next.

Ion Jauregui - AT Analyst



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