Vale Stock Triggers Death Cross Against Backdrop Of China's Economic Woes

Market sentiment around Vale SA VALE stock — already down 19.45% year-to-date — has weakened to a level where its price chart triggers a Death Cross.

Ongoing challenges in China's real estate and manufacturing sectors have led iron ore prices to plummet 25% since January given weak demand for the commodity.

And as a mining company, Vale’s business performance and stock price highly correlate with the price of iron ore and nickel.

Investors typically interpret a Death Cross as a bearish signal. It occurs when the 50-day moving average (yellow line in chart above), crosses below the 200-day moving average (blue line in chart above). Investors see this crossing pattern as indicative of a potential downturn in the stock’s price trajectory.

Investors often view the Death Cross as a sign that short-term momentum is weakening. As a result, some investors may interpret the Death Cross as a prompt to consider selling or taking a more defensive stance on their positions until there is evidence of a reversal in the stock’s downward trend.

Also Read: Nickel Industry Cutbacks To Support Prices As Miners Brace For Long Slump: ‘2030s Will Likely Be More Attractive’

Fundamental Reason Driving Technical Signal

Demand from China strongly influences the price of iron ore. After all, China is the world’s largest importer and consumer of iron ore.

So, when it comes to Vale’s stock price, iron ore’s current demand and supply dynamics become a key factor at play. Spot iron ore prices rose from $105.18 per dry metric ton on July 31, 2023 to $141.45 per dry metric ton on Jan. 1, 2024 on China reopening in 2023.

In 2024, China’s manufacturing sector has encountered hurdles arising from factors including the housing market crisis, subdued domestic demand, and the inclination towards nearshoring. These challenges have led iron ore prices to again plummeted to $117.05 as of March 4, 2024.

Vale stock has followed a similar trajectory. After a brief resurgence in the second half of 2023, the stock been on a continuous declining trend so far in 2024.

Read Next: No Bailout For Chinese Real Estate Developers Spells Trouble For Iron Ore Prices

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