Brazil has been hot lately after electing Bolsonaro as President in 2018. Daily charts look bullish so I wanted to take a look at the long term development of the EWZ ETF.

When we plot a long term ratio of EWZ against the Nasdaq 100, we see a round trip, pyramid pattern with two consolidation boxes at opposite ends at similar ratio levels. 2016 saw the EWZ:$NDX ratio break out of a 7+ year downtrend, with a backtest of the breakout in 2018. The ratio still has a bit of work to do before breaking through the second consolidation box (either up or down).

When we look at EWZ’s nominal chart, we see a massive 16 year wedge containing the 2002 lows, the 2008 highs and the 2016 lows. From 2013 through 2019, we also see a possible inverse head and shoulders with a right shoulder that intersects with the larger wedge pattern. If a breakout of the wedge and inverse head and shoulders were to happen at the 45 level, we can see a possible measured move target to 110, which would be 144% upside from the 45 level if the breakout does occur.

Could a bullish trajectory of the Brazil ETF indicate future strength in the commodity complex, particularly oil? It’s very likely. -Harry