Arch Coal is Worthless
- Posted by Greg Harmon
- on June 17th, 2013
Anyone that follows me on twitter or StockTwits knows that each weekend as I run through my stock charts I have put up the comment “Coal Still Sucks”. What is amazing is that I have been saying that for over 9 months now. Over that time the broad market has gone up a lot, but has also had pullbacks and flat periods. It just does not matter to coal stocks. They only go down. So with that I put forth that Arch Coal, $ACI, is worthless. Price target zero. The daily chart below shows the story. A continuing series of lower highs and lower lows. The Simple Moving Averages (SMA) are moving lower, and all are
above the price. The Relative Strength Index (RSI) is bearish and becoming technically oversold. This may lead to a bounce and an opportunity to short it at a higher level. The Bollinger bands are opening lower, and the Moving Average Convergence Divergence indicator (MACD) is falling. The Measured Move lower takes it to 3.25. There is no good news here. But it gets worse. The weekly picture shows a move down out of a descending triangle at 13 to a new base in a bear flag at 5.50. Breaking that flag lower at about 7 give a target on the Measured Move to 0 (technically -0.50). And the 3-box reversal Point and Figure chart agrees with a price objective of zero. What is amazing is that short interest is only 14%. I
guess the shorts were happy enough with the ride from 34 to 4. Still people want to buy this stock. 16 of the top 20 Options trades on this stock Monday were in the June and July Calls and done on the offer. Everyone playing for a bounce. Here is the fallacy in that play. Even if I give you the premise that the bottom is in (which clearly goes against the argument above) that does not mean it is now going to move higher. In other words, you may point out that some oscillator or indicator is oversold, but you cannot point to one that says buy this piece of …….So stop trying.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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