VALE is a trade I like for 2 reasons, it's a play on weak commodities and from what I understand, 60% of their revenue comes from China, it's also a bit of an Emerging Markets play.
Here's a weekly chart of VALE, see the top and the break, this has already done the volatility move after the break, so it's in a much better position for a trending trade.
It's been heading down since it was featured here, but also kind of in a bullish descending wedge, there may be a false break below the wedge if enough people see it, but in any case, the rule of thumb is "wedges retrace their base", so that unfilled gap in yellow does not look likely to be filled, meaning it would be a break away gap and add an extra element of bearishness to this trade. So if we get a bounce here, which would set up a nice short for those who are interested or an add to for those who are in, the target area would be around $22.50-$23 or so, I can update you if we reach that level as far as 3C charts and entries.
The 5 min chart has shown a positive divergence right at the wedge, so that makes some sense.
Here's the bigger picture for anyone considering or preferring trending trades (that would be me). 3C went negative at the 2007/2008 top and VALE fell apart, it also went negative at the 2010 top and has fallen apart, but the easy money is in the snowball decline like in 2008 which VALE has not entered yet, so in my opinion, an entry on a little strength sets VALE up as a great trending short sale candidate.
If you haven't already, I have a link from an old article I wrote at my free site, Trade-Guild about how you can make more then 100% on a short as people are not generally aware that you can make more then 100% on a short. Here's the link, it's a bit old, but still relevant.
Making More Then 100% on a Short
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