Tuesday, July 20, 2010

VALE Watch

Vale S.A. (VALE), the Brazilian metals and mining company, has risen through the 20-day simple moving average on a volume spike and bull signals galore. Earnings will be announced on July 28 after the markets close.
VALE $26.28

So far, the price has risen 5.6% intraday, measuring low to high in an upswing that has stairstepped in a series of higher highs and higher lows on the very short term 133-tick chart.

Volume is running more than double that of Monday.

The move, however, has not yet pushed the price above the $28.40 high that tops the sideways trend in place since late May, and the stock stands well below the $33.39 three-month swing high set in let April.

So VALE may indeed be on the move, but the skeptical trader will look at the chart and say, "Fine. Show me the trend", because without a higher high and higher low on the daily chart, there is as yet no uptrend at that level.

The 14-day volatility is 3.7%, slightly higher than the 200-day volatility of 3.5%. So, VALE is not positioned optimally for an earnings surprise play. The best bet for that tactic is to have lower near-term volatility than the longer-term average.

Longer term, the chart shows this month as being an upside reaction to three months of decline in the downleg from a lower high. The stock has been in a recessionary downtrend sine peaking in May 2008. VALE is heavily into steel, and with the economy on the ropes, manufacturers' demand for that raw material dried up.

All in all, as much as I like earnings surprises, the whole trend picture sets my inner alarm bells ringing. I don't like VALE as a play at this point. A move above the three-month high might change my mind, especially if it were followed by a higher low. But VALE's not there yet.

Reversal Levels
  • $33.39, +27.1% (swing high)
  • $28.40, +8.7% (sideways high)
  • $26.28 <== You are here.

  • $25.63, -2.5% (20-day ma)

  • $23.86, -9.2% (sideways low)

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Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic
About the glance: The colors indicate the state of each signal.
  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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