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After a prolonged period of decline since June 2021, shares of Vale SA (NYSE: VALE) may be poised for a comeback. The mining giant has faced significant challenges, with the drop in iron ore prices being a major contributing factor.
Further exacerbating the situation is the sluggish demand in China, the world’s largest consumer of iron ore and Vale’s primary export market. This combination of factors has weighed heavily on the company’s performance.
However, there are signs that the stock may be reaching an inflection point. With the potential for a recovery on the horizon, investors may be wise to keep a close eye on Vale SA’s stock in the coming weeks and months.
Hitting major support
A Look at Vale’s weekly chart and it becomes apparent that though the long-term bearish trend continues, highlighted by the bearish trendline, the stock is now at a crucial support level.
In its downward journey since 2021, Vale has twice taken support near the $11-$12 level, where it is currently trading. Despite the slowdown in China or fall in iron ore prices, breaking this important support would be hard for the bears.
Accumulation phase ongoing
The short-term price action gives credence to this thesis as we can see an accumulation pattern within the $11.5 and $12.6 range over the last month. The accumulation pattern is one of the first signs that a stock has stopped falling and can potentially move higher.
Both short-term bulls and long-term investors can take a position in the stock at current levels near $11.8, with a tight stop loss near $11.10. For short-term bulls, the first resistance they will face will be again at $12.6. If the uptrend doesn’t start soon, long-term investors can be patient and take solace in the fact that Vale has always been a generous dividend-paying company.
Bears can go for two plays here. One is to wait for the stock to again reach near $12.5 and then short it for quick gains or they can wait for the stock to fall first below $11.5 conclusively, i.e., close the day below it and then break below $11.1.
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