Has The VALE Finally Been Lifted On Commodities?

I hope you will forgive my attempt at a pun.

Brazilian multinational VALE, of course, is the 3rd largest mining company in the world. It is the largest producer of iron ore and the 2nd largest producer of nickel.

VALE traded as high as 44.15 in May 2008, plunged to 8.80 in November 2008, then rebounded to 37.25 in January 2011, and then collapsed (slowly) to this week's low at 4.13. Heck, VALE actually traded above $9/share on May 6, 2015, only 3 1/2 months ago. Given the fact that VALE is one of the lowest cost producers in almost everyone of its many commodity markets, and given the fact that VALE has managed its operations expertly through the carnage that litters the global mining landscape right now, I am more than a little surprised by the complete collapse in VALE's share price over the last several months.

However, VALE's stock price jumped 12.62% today (in a single day). At today's closing price of $5.00/share, VALE is now up 21% from its low set earlier this week.

In the interest of full disclosure, I bought my first share of VALE in early June at $6.10/share. I doubled down last Friday at $4.85/share, and then watched with horror as the stock printed 4.13 on Monday and then tested this low yesterday with a print at 4.20. Today's surge in VALE's stock price is exceptional, of course, but I am clearly still underwater on this trade. 

The reason for this column is not to share my sad story about a small part of my portfolio, but to reflect on the possibility that commodity prices in general may have finally found an important bottom after years of steady declines. Today's price action in VALE is significant, in my view, and I now believe that a major rebound in mining stocks is underway.

My preference for Gold and Silver mining stocks is well documented in this space, and I am still seriously over-weighted in this hated group, but VALE's price action today is more than just the result of a beaten down stock experiencing a dead cat bounce. VALE's price surge probably represents a major tone change in the entire mining sector with serious positive implications for commodities prices across the board!

Here are the latest daily and weekly charts for VALE. Please note the weekly chart buy signal now triggered by my computer trading system in VALE's stock price!

VALE Daily Chart

VALE Weekly 'Chart with Computer-generated Buy & Sell Signals