Vale S.A. (VALE) is a Brazil-based miner of nickel and other key metals and minerals (iron ore and pellets, nickel, manganese ore, copper, ferroalloys, metallurgical and thermal coal, copper and cobalt). As many market observers these days go on and on about demand destruction and weak commodity prices I have learned over the years to look beyond current distractions and focus on longer-term trends.
Let's check out a few charts of VALE.
In this daily bar chart of VALE, below, I see a saucer bottom pattern. The shares bottomed from June and the trading volume increased from the low in September -- a textbook example.
Early in a bottom investors are tentative buyers but in the second half of a bottom buyers are more aggressive when they see the fundamental story unfolding. VALE is trading above the 50-day and the 200-day moving average lines. The slope of the 50-day line is positive but the 200-day average line has more work to do.
The On-Balance-Volume (OBV) line shows a rise from lows in September/October. A rising OBV line tells me that buyers of VALE are more aggressive than sellers with heavier trading volume seen on days when the stock closes higher. The Moving Average Convergence Divergence (MACD) oscillator is positive.
In the weekly Japanese candlestick chart of VALE, below, I see a large triangle formation. Over the past two years VALE has made both higher lows and lower highs. Trading volume has increased from the middle of 2021.
The weekly OBV line made a low in November 2021 and a higher low in September 2022. Prices are trading above the 40-week moving average line but the slope of the line is still negative. Strength above $19 looks like it will break the downtrend from $23 in early 2021.
In this daily Point and Figure chart of VALE, below, I see that the software is projecting the $21 area as a potential price objective. A trade at $21 will be a new high for the move up and will refresh the uptrend.
In this weekly Point and Figure chart of VALE, below, I used a five-box reversal filter. Here the software targets the $35 area. A nice price target along with a big dividend. A trade at $22 is a major upside breakout.
Bottom-line strategy: I have a long-term view that the world will suffer from supply shortages in the next several years. These tight supplies will be rationed by sharply higher prices. I anticipate that VALE will be a beneficiary of these higher prices. Traders could go long VALE at current levels risking to $13. The $35-$40 area is my long-term target for now.
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