Itau Unibanco Holding SA (ADR) (NYSE:ITUB), a financial products and services provider, ended the session with a gain of nearly 3% yesterday. It was the 4th consecutive session ending in the green after the Brazilian President Dilma Rousseff promised last week that the government would do whatever is necessary to meet the 2015 fiscal target, including a possible large cut to the year’s budget. The volume for the session at 19 million was slightly higher than the average volume of 17.5 million.
The weakness of the Brazilian economy has been contagious for all the companies and Itau Unibanco Holding SA (ADR) (NYSE:ITUB) has not been an exception. The primary budget deficit in the 12 months through February has kept increasing to reach 0.7% of the GDP, nowhere even close to the earlier set target of 1.2% surplus in 2015. In this context, the announcement by the new finance member Joaquim Levy, of raising taxes if the revenue is not enough may sound rattling to many but it definitely looks like the market like the determination of the president to meet the fiscal targets.
Technically, Itau Unibanco Holding SA (ADR) (NYSE:ITUB) is in a very interesting position. From a larger perspective, the fall from the 2014 top of $18.49 to the 2015 bottom at $10.12 is the slowest one compared to the earlier drops of the same magnitude. This drop has also taken the form of a Falling Wedge, which suggests that, a breakout above $12.00-50 may trigger a turnaround. That is a huge statement for a stock that has been in the grip of a bear market for a long time. On a successful breakout, the immediate target would be $13-$14 and then in the intermediate timeframe, the band of $18-$19.