Are These Brazilian Stocks Ready to Samba Again?

07/15/2013 7:00 am EST

Focus: STOCKS

With investors' 10-year love affair with BRICs ending, Frank Zorilla of ZorTrades.com sees stabilization on the charts of several Brazilian stocks after severe corrections.

I'm always on the look out for stocks that are stabilizing or have stabilized for a few days after huge down trends. Technicians will call this pattern bearish flags, which very simply is a bearish pattern that historically has led to lower prices, however, since 2009 this pattern for the most part has turn into a bullish pattern.

If you follow me on Stocktwits or Twitter, you probably have seen me tweet about stocks that are exhibiting a character change. These stocks, if picked off correctly, can lead to a decent short-term risk reward trade. I tend look for the stock to stabilize and get above a moving average that has acted as resistance for a long time, it is normally the 20-day moving average.

Friday, as I was going through one of my scans, I noticed that a few stocks from the region that were exhibiting stabilization after deep corrections. I find it very encouraging when I find a cluster of stocks from the same sector or region showing the same pattern similar to what I saw in the miners: NUGT and GDX on 6/28/2013.

Some Brazilians stocks are showing this pattern and a few of them had inside days on Thursday and also take notice of the string of doji-type days: BSBR, PBR.A, SID, GFA, GOL, EWZ, and TAM.

BSBR

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GFA

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PRB.A

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SID

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The Brazilian outlier, TAM

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The key here is to look for strength before jumping in and use the most recent low as a stop.

By Frank Zorilla of ZorTrades.com

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