According to HSBC analyst Mauricio Augusto de Camargo, the Brazilian stock market can repeat the bearish pattern seen in 2008, and drop another 20-30% to 43,500 points. By analyzing historical monthly charts since 1998, Camargo told site Exame that when the iBovespa moving averages of 8 and 13 months intersect there is a large probability of a sharp correction at works.
According to the chart below, the analyst observed that when the 8-month graph crosses below the 13-months it clearly indicates a drop of over 30% in the coming months.
“The point is that the Bovespa index is in downward trend in the medium term and that the recent spikes seen were only bull traps,” he says.
The HSBC analyst points out that the drop can happen in a few steps, not all at once. The first support was at 54,500 points, a level that was already broken last Monday. Then, the next ones are at 52,800, 51,500 points, and finally 47,500 points, which was the minimum reached in August last year.
“I think the index will keep dropping steadily but with a few spikes in between, but ultimately, it should settle at around 43,500 points,” said Camargo.