Got Coal? When “Less Bad” Starts To Work

The sector that “The Street” hates, and the politicians detest, all traded like cancer curing biotech stocks on Thursday. There comes a point when there is no one left to sell, the shorts way overstay their welcome and “less bad” earnings get treated like a beat.

Thursday’s action:

  • Arch Coal $ACI was up 8 percent, 47 million shares are short
  • Peabody $BTU was up  6.8 percent higher, 18 million shares short
  • Chapter 11 protected Patriot Coal $PCXCQ was 7 percent higher
  • CONSOL  $CNX was 6.4 percent higher, 22 million shares short
  • Alpha Natural $ANR was 14% higher, 28 million shares short
  • James River $JRCC reported Friday and was up 5%, 8 million shares short
  • Walters Industries $WLW was up 4.5%, 3.4 million shares short

So what’s going on? Two weeks ago, Arch sparked a rally in the coal sector by confirming reports that coal stockpiles were falling, especially in the western states where the company produces most of its coal. Arch also demonstrated good unit cost control despite lower production. The market liked Arch’s earnings, considering them less bad than feared with signs of a tentative bottom in coal prices.

The market waited a couple of weeks for the report by $ANR which happened  Wednesday, it was bad, but again, less bad. The stock went down, but reversed on Thursday to the tune of + 14%.

Fridays was basically a consolidation day for the group as they shook of Thursday’s gains.

The charts are constructive, volumes are improving dramatically and weekly technicals are turning up.

I’ve been bullish and continue to be bullish on the black rock. This isn’t a quick “trade” for me. I’m looking for doubles, maybe triples.

Buy em’ when they’re dyin’.

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