Pierce the Veil II! … as promised (VALE)

We’re going to slap this one around like Bobby Kramer in “Loan Shark Muscle” (1959), the B-movie classic that launched the career of Daisy Tenderloin, among others.

That movie, by the way, represented a breakthrough for the Bakersfield Vision group, a loosely associated band of filmmakers whose weekend exploits nearly got them murdered in the mid-1950’s.  See here.

Anyway, the trade for this week is a play on Brazil’s mining giant VALE S.A. (NYSE:VALE), the world’s largest producer of both iron ore and nickel, and holder of bragging rights to some of the greatest tailing dam failures in history.

Here’s her chart –

There’s Nothing Left

Lift the veil on this one, and you’ll see there’s nothing there but a big, laughing Amazonian moon-face.

No Daisy Tenderloin.

No nothing.

Consider –

• After a 20% climb in a mere six weeks on less than average volume,
• RSI pushed toward 80 (in green),
• Price got turned back for the third time from a descending fourteen month trendline (in red), and
• All this while all the stock’s salient moving averages have unfurled lower (boxed, in blue).

There’s reasonable support between 12 and 13, and it’s there we expect to see the stock settle over the next few weeks.

Here’s the weekly chart for the same time period –

As far as support goes, the weekly chart indicates the same twelve dollar level, roughly in line with the bunched, weekly moving averages (circled in red).

Beyond that,

1. RSI is bullish, but MACD has yet to confirm, and could take several more weeks to do so, and
2. Price has broken above the moving average cluster at $12, but will likely retrace in the coming weeks for a retest of that line.

Late last week enthusiasm for VALE shares climaxed with a daily PUT/CALL ratio reading out of… well, a 1950’s B-movie thriller.

The number was completely out of character for the stock, registering a mere 2%.

Everyone was bullish.

And that says it all.

With that in mind, we offer you the following –

A Jew and His Gold recommends you consider selling a strangle on VALE, using the March 20^th 14 CALLs, now going for $0.45, and the March 20^th 12 PUTs, today at $0.31.  Sell them both for a total credit on the trade of $0.76.

Many happy returns – and a safe and prosperous New Year!

Matt McAbby

Follow @HughLOHaynew