Vale stock (NYSE: VALE) has dropped over 25% in just the last one month and currently trades close to $14.50. The sharp decline in the stock was driven by the crash in the iron ore price levels over recent weeks. China’s second biggest property company – Evergrande – recently announced that it is finding it difficult to sell off assets quickly enough to repay its mounting debt load. This announcement led to fear about the prospect of defaults and a domino-effect crash through China’s housing market. This would, in turn, have a severe adverse impact on steel and iron ore demand. Global iron ore price has crashed from $220/ton at the end of July 2021 to $120/ton at the end of September 2021, reflecting a drop of 45% in two months. Though the property giant seems to have reached an agreement with yuan bondholders on interest payments, such a sharp drop in iron ore price led to a 25% drop in Vale stock over the last one month. But will Vale’s stock continue its downward trajectory over the coming weeks, or is a recovery in the stock more likely?
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for VALE stock are likely to be average 16% in the next one-month (21 trading days) period after experiencing a 25% drop over the previous one-month (21 trading days) period. Also, there is a 79% chance of the stock giving positive returns over the next one month. But how would these numbers change if you are interested in holding VALE stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test VALE stock price forecast after a rise or fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day! For additional details about Vale’s business, see how Vale Revenue is generated.
MACHINE LEARNING ENGINE – try it yourself:
IF VALE stock moved by -5% over five trading days, THEN over the next 21 trading days, VALE stock moves an average of 1%.
Some Fun Scenarios, FAQs & Making Sense of VALE Stock Movements:
Question 1: Is the price forecast for VALE stock higher after a drop?
Consider two situations,
Case 1: VALE stock drops by -5% or more in a week
Case 2: VALE stock rises by 5% or more in a week
Is the price forecast for VALE stock higher over the subsequent month after Case 1 or Case 2?
VALE stock fares better after Case 2, with an expected return of 1.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 2% for Case 2. This implies a price forecast of $15 in Case 1 and a figure of $15 in Case 2 using VALE market price of $14.49 on 9/26/2021.
In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an expected return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a rise or drop.
Try the Trefis machine learning engine above to see for yourself how the forecast for VALE stock is likely to changes after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold VALE stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For VALE stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
Question 3: What about the stock price forecast after a rise if you wait for a while?
The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
VALE’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for VALE stock by changing the inputs in the charts above.
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