IBOV boxed in by its 55-week ma

2022年2月18日

During times of heightened volatility in markets, I have observed that markets have a tendency to mean revert to their long-term moving averages (my favourites are the 55 and 200-week moving averages) and I noticed this beautiful set- up on the IBOV weekly chart (Brazilian stock market). Not only did the market test and bounce off the 200 week-moving average twice at the end of 2021 and the beginning of 2022 (200-week ma is currently at 101159), but we have just hit the 55-week ma at 115636.

So, what does this mean? Well, after an almost 15% rally this year, I would prepare for some profit taking at the 55-week ma. Adding to this resistance is the 200-day moving average at approx. 115321 AND the 50% retracement of the move down from June 2021 to December 2021 at 115560, this is a veritable WALL of resistance, and we would allow for a set-back towards the 55-day ma at 107925. It seems to still be in a longer term up move so we would expect to see some stabilisation around here.

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