WTF happened to PBR today? - futures io
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WTF happened to PBR today?


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WTF happened to PBR today?

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  #1 (permalink)
S. Florida
 
Experience: Intermediate
Platform: MBT Pro, NT
Trading: Stocks
 
Posts: 4 since Sep 2014
Thanks: 6 given, 0 received

New here so please forgive / redirect as needed:

Looking for some insight on unexpected behaviour on PBR today - I was happily short on it when for some reason late afternoon it pegged itself to $6.05 as its bottom no matter what.

Good volume but I've never experienced what appeared to be a managed bottom, went on for maybe 20 min so against my rules I closed up (at a nice profit, but still against my rules).

Still curious about this new experience, what can influence a floor that much?

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  #3 (permalink)
Calgary Alberta/Canada
 
 
Posts: 934 since Feb 2014


I don't think the fall in price today is particularly surprising given the market conditions for its commodity O&G and the falling prices for the price of oil

I shall give you my take on the company

Starting with its fundamentals

Balance sheet

Stock Market Quotes | Company Financials, Financial Information

This company has heavy debt (note this info was last updated June/14 so things are probably worse)

Current debt: now $10.69B rising from $8.16B in the year previous....
Long term debt: $128.94B rising from $104.10B in the year previous....

for a combined debt load of about $140Billion .... not chump change

Income Statement

Stock Market Quotes | Company Financials, Financial Information

Its Operating Revenue was quite stable back then at about $35 Billion with a Net revenue of whopping $2Billion/quarter (REMEMBER this is June/14 data when Oil was $108/barrel!!! Oil is $50/barrel now... it is not making near that amount of money NOW and it was a low income back then IMHO)

Cash Flow

Stock Market Quotes | Company Financials, Financial Information

looking at this sheet it shows the company paying something like $2.2Billion/quarter in interest on that long term debt.

Now I wonder...... the debt is not getting paid off so far that we can see.... Interest on the debt is HUGE for every quarter.... and the commodity it produces has dropped from $108/barrel to $50.00/barrel... Is this company in trouble?...I think so

This Brazial company is a huge conglomerate from exploration to production to refining and sales.... all are declining revenues in the O&G sector

Conclusion: Overall this is a sick puppy.

Now why the drop today??

Here is an intra day chart for the last 5 days





Well it was cruising along not too badly until Friday then it dropped in 2 huge steps Friday and today

Why??? well look at the comparison between crude oil and PBR





Notice how at the begining the price of oil was stable and the share price of PRB was also..... but Friday the price of oil dipped and Investors lagged a bit but plunged even more rapidly.... Monday...no improvement in Oil prices , in fact they dropped even more.... result another dive in PBR price.

Conclusion:

Don't listen to this nonsense article in Forbes magazine

Oversold Conditions For Petroleo Brasileiro (PBR) - Forbes


that is a bunch of bull feathers.... they are acting like PBR has control of their destiny... The guy that wrote that TA has no clue as to how to evaluate TA...falling below RSI 30 means BEAR and it could stay down there for months... hopefully you understand how much in debt that company is in and how difficult it will be for that company to service that debt.

When you are investing in a company producing a commodity...pay attention to that commodity price. Why do you think Gold companies are not doing well... it isn't because Gold prices are rising...is it...quite the opposite.

Well the same applies to Oil and Oil companies. If oil prices turned on a dime and went to $60/barrel you would see a rise in the price of PBR... though I still think given its debt load it will be in trouble for a long time.

I hope this helps you understand what is going on.

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  #4 (permalink)
S. Florida
 
Experience: Intermediate
Platform: MBT Pro, NT
Trading: Stocks
 
Posts: 4 since Sep 2014
Thanks: 6 given, 0 received

Wow! Thank you for the elaborate reply, really!

PBR is certainly a storied stock.

If I could my primary concern was trying to understand something that I've never observed before: a volume stock like PBR pegged at $6.05 for many many many minutes this afternoon.

It was so odd that I just manually closed my existing short position (and took a nice profit) rather than trying to understand why it was stuck there - government protecting it or what? I am not savvy enough to discern so I closed up.

Curious though, anyone else see anything odd or better yet what lesson can I learn to trade better going forward?

P.s.: To be clear, I am not investing in this stock just trading it.

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