What Today's Oversold Extreme Means for This Investment

One market has been ripping higher in 2022...

It has happened in spite of the wreckage we've seen in U.S. stocks. The S&P 500 Index is down 9.5% this year. And the Nasdaq has done even worse, down 14.4% to start 2022.

Meanwhile, this ignored market has been on a tear. It's up 19.2% to start the year. And despite that huge outperformance, the rally is likely to continue...

That's because right now, this market is coming off a rare eight-day rally. And as I'll explain today, this setup points to another 13% move higher over the next 12 months.

Here are the details...

Longtime readers know we always focus on the trend. You want to buy assets when prices are moving in your favor.

Still, even knowing that, there are plenty of ways to measure the trend. And one important way to do it is to look at when an asset strings together consecutive up days.

This is exactly what it sounds like... It's when an investment rallies several days in a row without a single down day.

These unbroken rallies often signal an acceleration of the current trend. So if a stock is moving higher and racks up several up days, more gains are likely on the way.

That's exactly what we're seeing in Brazilian stocks right now. After a hot start to the year, this market trend is beginning to accelerate...

The iShares MSCI Brazil Fund (EWZ) was up eight days in a row earlier this month. Take a look...

Brazilian stocks aren't something most investors pay attention to. And that was for the best last year...

The market absolutely crashed to end 2021. It lost around a third of its value from the June peak through the end of the year. But as the chart above shows, EWZ is coming back with a vengeance.

Again, the market is up 19.2% in 2022. And Brazilian stocks recently strung together eight consecutive up days. So the new rally is likely just getting underway...

Similar setups have been buy signals for investors... often leading to outperformance in the short term. Take a look...

Brazil hasn't been a big winner in the long run. It has returned a measly 2.6% since 2000. But don't give up on this global market altogether. You should pay attention to Brazilian stocks when they're gaining momentum (like they are today)...

Similar momentum setups have crushed a typical buy-and-hold strategy. History shows a 6% gain in the next three and six months is likely. And investors can expect a 13% gain over the next year.

In short, the recent momentum in EWZ is a positive sign going forward. This market has been outperforming so far in 2022... And that's likely to continue.

Two decades of data suggest Brazilian stocks are a good opportunity today. If you want to take advantage of it, shares of EWZ offer a simple way to make the trade.

Good investing,

Chris Igou

Further Reading

The financial sector in one overseas market might tempt you with low valuations today. But one recent signal shows it's a bad bet today. And a lot of investors are falling for this trap... Read more here.

It's a good idea to diversify your investments outside of the U.S. However, that doesn't mean the rally in U.S. stocks is over. Investors are incredibly bearish today – but history shows more gains are likely... Learn more here.

Market Notes
TIMES ARE TOUGH FOR THIS RETAILER

Today’s company is grappling with the COVID-19 pandemic…

Folks are slowly coming to terms with the fact that the novel coronavirus is here to stay. But this new reality has presented many challenges for our economy. And some businesses are struggling to keep up amid these new stressors. Take this example…

The Gap (GPS) is a $5 billion clothing retailer. The company has been around for more than 50 years, and it includes brands such as Banana Republic, Old Navy, and its namesake, Gap. People know and love their clothes. Recently, however, COVID-related factory closures and other supply-chain problems have disrupted the company’s ability to meet demand. Reduced inventory and shipping delays hurt sales… The company had to slash $550 million to $650 million off its estimated full-year 2021 revenue, and it lost $152 million in the most recent quarter.

As you can see, GPS shares are down more than 60% since May 2021… and shares recently fell to new 52-week lows. Even though this retailer sells brands that folks love, that doesn’t help much if Gap can’t stock its shelves…