Coal For Christmas and A Sweet Squeeze

coal2 300x199 Coal For Christmas and A Sweet Squeeze

Coal stocks traded like $AAPL after a new product announcement Friday. Coal has been priced for zero lately, especially after Patriot coal $PCX,  the red headed step child of the bunch, recently went BK. Patriot was the worst of a bad lot and was never a name that I liked anyway.

The fear was that if Patriot had acquiesced to the pain of global slowing, the rest of the group would follow suit, fold their tents and just implode. These stocks have been priced for that.

However, Arch Coal, $ACI reported earnings on Friday. The call went well. They aren’t going bankrupt, as a matter of fact they have cleaned up their house, knowing that they are in deep shit. Their freight traffic was up, exports surprised to the upside, they exported a record 7 million tons and are looking to do 12 million tons by year end. Exports to Europe actually increased.

If you look at the charts, you will see that an epic short squeeze occurred in some of the names on Friday. $ACI hasn’t traded this much volume  since the age of Pericles, $ANR also rocked and saw “off the chart” volume, as did others in the group.

Bottoms are impossible to call in individual stocks or sectors for that matter, but coal may be squeezing in a bottom here. It still remains my favorite sector over the next six to eight months. My most recent thought are here from back in June.

The group had a nice move Friday, don’t chase them, wait for levels on pullbacks.

Below are some charts.

$ACI- The stock traded up 30% on Friday after the earnings call. As you can see the stock broke out of the white downtrend line that was in place from way back. That breakout occurred on 6/29. It was a big head fake, because it went back as it went back to test the breakout and actually broke lateral support (red line) for a couple of days. It overthrew and went back to retest. Stocks do that all the time. The volume Friday was monumental and signals a major reversal if not a bottom.

aci1 300x198 Coal For Christmas and A Sweet Squeeze
Arch Coal

$ANR- also off the chart volume Friday, however their earnings report isn’t until Aug. 8. My target though is 10-11 and higher over time. You can always wait for the earnings report if you want to play it safe.

anr3 300x198 Coal For Christmas and A Sweet Squeeze
Alpha Natural

$WLT-  This stock has been pain and ecstasy for me over the last year when I trade it. Since April, Walters has put in one of the most beautiful textbook head and shoulder patterns (seen best on weekly chart) than anything I’ve seen (maybe $MCP was better). A real bearish pattern that broke lower and validated everything technically. The daily however shows that it is managing to hold the trendline. However, earnings don’t report until Wednesday.

wlt3 300x198 Coal For Christmas and A Sweet Squeeze
Walters Industries

$CNX- reported last week too. Not great, but not going out of business. This one has a tendency to do the best in  hot coal market and not as bad in a cold coal market. Another one that is doing the right things, until the tide turns. Really needs to break above 32 level (white downtrend line basically) to really get going to the upside, however it can be traded.

cnx1 300x207 Coal For Christmas and A Sweet Squeeze

$BTU- Recently reported so that is out of the way. I thing 23-25 is a short term target, but much higher over time.

btu3 300x196 Coal For Christmas and A Sweet Squeeze
Peabody Energy

$CLD- Failed at its downtrend line on July 3 after a really nice rally. It does look however that it may be trying to pop out of a mini falling wedge that started  after it put in that high. I believe earnings are Tuesday after the close.

cld 300x187 Coal For Christmas and A Sweet Squeeze
Cloud Peak

I am still looking for 50%  (or better)in some of these names over the next 6-12 months. If you would like to see what I am doing with more specificity, you can subscribe here.

 

 

 

 

Joe Donohue

Joe is a full time trader with 25 years experience. He is a senior contributor and investor in Stocktwits and has been seen on CNN Money and quoted in Marketwatch, Forbes, Reuters, NY Times and Wall Street Journal.