The shares of Vale (NYSE: VALE) one of the world’s largest producers of iron ore and nickel, with operations largely based in Brazil, have declined by about 8% over the last month (21 trading days), underperforming the S&P 500 which remains down by 3% over the same period. Iron ore prices have seen some more pressure in recent weeks, trading at about $100 per ton presently, down by 10% over the last month and down by almost 14% year-to-date. Chinese steelmakers, who account for about half of all global consumption of iron ore, are seeing a slowdown on account of intensifying Covid-19 restrictions in some Chinese provinces and also a downturn in the Chinese real estate market. There are also concerns about the broader global economy amid surging inflation, high energy costs, and rising interest rates. Separately, Vale’s Q2 2022 results, published toward the end of July, were also mixed, with revenue declining by 33% versus last year and this could also be impacting the stock.
However, now that Vale stock has seen a decline of about 8% over the last month, will it continue its downward trajectory in the near term, or is a rally imminent? Going by historical performance, there is only a 46% chance of a rise in Vale stock over the next month. Out of 638 instances in the last ten years that Vale stock saw a twenty-one-day decline of 8% or more, 291 of them resulted in Vale stock rising over the subsequent month (21 trading days). This historical pattern reflects 291 out of 638, or about 46% chance of a rise in Vale stock over the coming month, implying a negative near-term outlook for the stock. See our analysis on VALE Stock Chance of A Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of Rise’ using last ten years data
- After moving -8% or more over five days, the stock rose in the next five days on 49% of the occasions.
- After moving -5% or more over ten days, the stock rose in the next ten days on 47% of the occasions
- After moving -8% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 46% of the occasions.
This pattern suggests that VALE stock is unlikely to see major gains in the near term.
|S&P 500 Return||-1%||-18%||75%|
|Trefis Multi-Strategy Portfolio||-3%||-18%||225%|
 Month-to-date and year-to-date as of 9/6/2022
 Cumulative total returns since the end of 2016