Coal is Not Fueling This Market

• Posted by Greg Harmon
• on February 14th, 2012

If there has been one constant over the last 6 months in this stock market what would you say it is? Large gap moves overnight? The wall of worry? The disconnect with the US Dollar? I’d go with something much more simple: Coal Stocks suck! Whether is is metallurgical, thermal or just for Santa to put in a naughty kid’s stocking, nobody wants it. Take a look.

Arch Coal, $ACI

Arch Coal, $ACI, reported earnings Friday morning last week and tore the bull flag it had previously built to shreds. It has been finding support from a series of trends rotating lower like Fibonacci Fan lines, making lower lows November. With a Hammer print Tuesday it may have some promise, but stepping back, the last 5 months is just one big bear flag. Measured Moves on a break below 13 do not apply since a stock still can’t go below zero. And there is no reason to get excited about it until it gets over 16. Boooorrring!

Walter Energy, $WLT

Walter Energy, $WLT, has a similar ugliness to it. But here there is an upcoming catalyst. It reports earnings on the 21st. Until then it is heading lower with a Relative Strength Index (RSI) that is bullish but close to crossing into bearish territory and a Moving Average Convergence Divergence (MACD) indicator that is has crossed negative. These support more downside. There looks to be some support around 62 perhaps from the previous falling trendline but more substantial at 56.50, quite a ways lower. You could use Tuesday’s high as a stop on a short.

James River Coal, $JRCC

James River Coal, $JRCC, looks nearly identical to Arch Coal. The long descending triangle has turned into a bear flag. Different shape, still bearish, and with a move under 6.20 finding support more than 12% lower at 5.40. Again the Measured Move is irrelevant as it would suggest something like negative 12. And with the 4th lower high in a row since the big bounce in October, nothing pretty on the upside until it gets over 8.75. It does not even have a catalyst for a substantial move until it reports on March 5th.

Go ahead and set some alerts for this sector, but if you want my two cents it is a better bet to the short side. Carry on.

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