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Companhia Vale - RIO - close: 29.61 chg: -1.32 stop: 32.01

Company Description:
Companhia Vale do Rio Doce (CVRD) is among the four largest global, diversified mining companies and is the largest Latin American private company by market capitalization. CVRD is the world's largest producer and exporter of iron ore and pellets and one of the leading producers of manganese and ferro- alloys. It also produces copper, bauxite, kaolin, potash, alumina and aluminum. CVRD is the largest logistics service provider in Brazil, where it owns and operates a series of railroads and ports. It also holds stakes in steel companies in Brazil and abroad. (source: company press release)

Why We Like It:
The metal and mining sector has come under some heavy selling pressure lately. Several stocks in the group are breaking down from their multi-month bullish trends. RIO happens to be one such stock that has broken through rising technical support at its 50-dma and round-number, psychological support at the $30.00 mark. The P&F chart shows a sell signal with a $23.00 price target. We suspect that if RIO continues to correct the stock will find support in the $26-25 range. The risk with shorting RIO here are as follows. First RIO is short-term oversold and somewhat due for a bounce in spite of today's technical breakdown. Plus the major averages (Dow Industrials and S&P 500) are nearing significant support and could bounce. If the major averages do bounce we would expect RIO to trade back toward the $31.00-31.50 level before turning lower again. Another risk is RIO's rising 100-dma, which could become new support. On the positive side all the technical oscillators are bearish and the weekly chart's MACD has produced a new sell signal as well. If you suspect a bounce then wait for a failed rally under $32.00 as your entry. If not consider entries under $30.00. We're targeting the $25.50-26.00 range.

Picked on March 29 at $29.61
Change since picked: - 0.00
Earnings Date 05/11/05 (unconfirmed)
Average Daily Volume: 2.8 million

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