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Petrobras (NYSE:PBR) stock plunged nearly 24% in premarket trading Monday after Brazilian President Luiz Inácio Lula da Silva secured another term, defeating Sen. Flávio Bolsonaro. The election outcome deepened the political rift between Latin America's largest economy and U.S. President Donald Trump.
The sharp decline came as investors reassessed Brazil's political outlook. Meanwhile, Nasdaq futures rose 0.09%, and S&P 500 futures gained 0.15%.
Lula defeated right-wing Sen. Flávio Bolsonaro in Brazil's presidential runoff Sunday. The result surprised investors who had expected Bolsonaro to win.
Brazilian stocks had climbed sharply in recent weeks following Bolsonaro's unexpected first-round lead. Investors anticipated that his administration would introduce business-friendly reforms, tighten government spending and support privatization.
However, Lula's victory likely forced investors to unwind those positions, triggering a broad sell-off in Brazilian equities.
Petrobras faces particular pressure because the Brazilian government controls the oil producer. Other U.S.-listed Brazilian companies also suffered steep losses following the election.
Petrobras shares have fallen below key short-term technical levels following Monday's sharp premarket decline.
The stock traded 17.1% below its 20-day simple moving average (SMA) of $24.18. It also stood 7.2% below its 50-day SMA of $21.61.
However, shares remained slightly above the 100-day SMA of $19.65 and the 200-day SMA of $18.89.
Meanwhile, the relative strength index (RSI) stood at 73.51. A reading above 70 typically signals overbought conditions and suggests the previous rally may have become stretched.
Despite the sell-off, the 50-day SMA remains above the 200-day SMA. This bullish pattern, known as a golden cross, emerged in January.
Traders are watching two key price levels:
A sustained break below $20 could expose the stock to further selling pressure.
Petrobras shares were down 23.62% at $19.98 during Monday's premarket session, according to market data.
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