Ultrapar Participacoes S.a. has to be traded not held

Nov 10th, 2014 – Comment

At the moment the MACD and the RSI are indicating that we should expect more selling pressure.

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Hi Lou,

I would love to get your thoughts on UGP.  I haven’t been able to find much info on the stock. Clearly it’s strong technically, but it’s a little scary without knowing if Brazil is a stable jurisdiction or about the fundamentals of this company.





Hey Naheed,

Thanks for the assignment. Ultrapar Participacoes S.a. (UGP NYSE) is a Brazilian group, with operations and commercial offices in South and Central America as well as the United States.  There are three operating units one that distributes natural gas and liquifies petroleum gas, another that produces chemicals and finally an integrated logistics solution unit for special bulk cargo.

You are right in showing concern regarding the political risk associated with overseas investments. I can recall a wag who had been promoting emerging markets having to eat humble pie when they became submerging markets. It didn’t take much digging to find the financial statements for the company so make sure that you don’t assume that because they operate in overseas that they don’t have to report as an issuer on the New York Stock Exchange. You may question the quality of the reporting but rest assured that listed companies must report if they are on the big board.

An inspection of the charts will help inform my thoughts on UGP.




The three- year chart clearly outlines a stock that is tailored for traders not buy and hold investors. Over the last twenty three months UGP has offered multiple opportunities to buy and sell as it oscillated four times in a range with support at $21.00 and resistance at $26.00. At the time of this posting the shares have breached support at $21.00 putting a caution flag on the track. What is also evident is that the MACD and the RSI generated multiple buy and sell signals that the informed investor could have exploited.







The six- month chart highlights the sell signal that the MACD and the RSI produced in September as UGP met resistance at $25.50 and made its way to a 52-week low of $18.50. The shares did bounce off the lows but have met resistance along the downtrend line. At the moment the MACD and the RSI are indicating that we should expect more selling pressure. This stock demands constant surveillance and decision making if you are going to take a position.

Make it a profitable day and happy capitalism!







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