Trade of the Day: Vale SA (ADR) (NYSE:VALE)

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The decline in Brazilian stocks on Thursday was a reaction to an emerging bribery scandal involving the Brazilian President, Michel Temer. Having just gone through a period of intense government corruption and recession, the Brazilian economy is understandably sensitive to any further disruptions.

Stocks then rallied (including Brazil and emerging markets) on speculation that the Fed may slow its withdrawal from QE. While it seems likely that North American stocks will continue to do relatively well, this does not solve Brazil’s problem, and we think the rally in Vale SA (ADR) (NYSE:VALE) is a fakeout.

We like the opportunity in VALE as a way to profit from the decline in the Brazilian real, and it gives us some bearish exposure to base metals, which continue to look soft. Our short-term target is back to Thursday’s lows, where we will re-evaluate the trade depending on momentum.

‘Buy to open’ the VALE June 8 Puts (VALE170616P00008000) for a maximum price of $0.25. 

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Article printed from InvestorPlace Media, https://investorplace.com/2017/05/trade-day-vale-sa-adr-nyse-vale/.

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