NEW DIRECTIONAL CALL PLAYS
Vale SA - VALE - close 27.43 change -0.13 stop 59.80
Vale S.A. is a metals and mining company. The Company is also a producer of iron ore and iron ore pellets. It also produces manganese ore, ferroalloys, bauxite, alumina and kaolin. It also produce aluminum, copper, coal, potash, cobalt, platinum group metals (PGMs) and other products. The Company operates large logistics systems in Brazil, including railroads, maritime terminals and a port, which are integrated with its mining operations. Directly and through affiliates and joint ventures, it has investments in the energy and steel businesses. Its principal nickel mines and processing operations are conducted by its wholly owned subsidiary Vale Inco Limited (Vale Inco), which has mining operations in Canada, Indonesia and New Caledonia.
Target(s): 28.80, 29.25, 29.70
Key Support/Resistance Areas: To Follow
Time Frame: 1 to 3 weeks
Why We Like It:
VALE is an international basic materials producer. Demand is increasing from emerging markets and various other developed countries whose economies are growing at a more rapid pace than in the US. RBC cut VALE to sector perform in the pre-market on 9/2 and the stock has lost about -5% since. However, VALE is maintaining two upward trend lines and bounced hard off its 50-day SMA on Monday. I suggest we use the weakness to our advantage by initiating long positions if VALE trades to $27.25. Our stop will be $25.80 with our primary targets near the stock's August highs. NOTE: I have chosen a further out of the money call than normal to reduce risk on the trade should the stock break lower.
Suggested Position: Buy November $29.00 CALL, current ask $0.62, estimated ask at entry $0.55
Annotated daily chart:
Entry on September xx
Earnings 10/28/10 (unconfirmed)
Average Daily Volume: 17 million
Listed on September 8, 2010