RIO has been in a downtrend for almost 2 years now. It has been forming a series of lower highs and lower lows. It has formed an island reversal, indicated in the image below. We can see another island reversal in early July and how the stock performed after that. By shorting it here around $54.90, we place a stop at $57.20, and it should go to a new low under $50.20. Based on those figures its a 2:1 return, but the stock will most likely extend to the $48 area, making it closer to a 3:1 risk reward ratio.
