Vale SA (VALE) 8/31/09 PriceWatch Alert Technicals Showing Bullish

Posted: Monday, August 31, 2009 8:14 AM EDT
By: Market Intelligence Center Staff

Vale SA (NYSE: VALE) ended the last trading session at $20.06. So far the stock has hit a 52-week low of $8.80 and 52-week high of $27.06. Vale stock has been showing support around 19.66 and resistance in the 20.58 range. Technical indicators for the stock are Bullish and S&P gives VALE a neutral 3 STAR (out of 5) hold rating. VALE appears on the Investors Observer Stocks In The News list. HSBC Securities downgraded VALE Tuesday to Underweight from Neutral. For a hedged play on this stock, look at a Mar '10 19 covered call (RIO CT) for a net debit in the $16.91 area. That is also the break even stock price for this trade. This covered call has a 201 day duration, provides 15.70% downside protection and a 12.36% assigned return rate for a 22.44% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the VALE Jan '11 7.50 Call (VOH AU) and selling the Mar '10 19 call (RIO CT) for a $9.55 debit. The trade has a 201 day life and would provide 15.00% downside protection and a 20.42% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). Vale has a current annual dividend yield of 1.37%. [ABR-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo