Coal Case Files

I thought it was time to go down into the deep recesses of the sub-basement where the cold cases have been boxed and filed away collecting cob webs to reevaluate coal based upon new evidence. For some time now coal stocks have been populating my scans and are showing up fairly frequently as of late on the largest % daily gain list. In addition I've noted increased chatter on the Twits, so interest in these stocks is beginning to perk up as well.

A number of coal related stocks are at or near historical lows and many are down 90% or more from their peak price. Of course price could go lower, however the industry itself isn't going to disappear anytime soon, so at these depressed prices it's worth paying attention to future developments as any perceived change offers an excellent low risk entry with decent probability of a high reward trade on a longer term time frame should there be a cyclical recovery period.

One of the things I noted at the end of June was the float turn over for WLT. WLT traded 253M shares which is 4x the float. The prior two months it traded 147M and 136M respectively. In addition this happened to form a bottom on the monthly time frame from which price has rebounded since and also happened to be in the price zone of the 2009 bottom as well. The two questions I'm looking to have answered is if this is just a reflex bounce and the downtrend will continue, or will this be an area of support from which price initiates a new uptrend not dissimilar to the run after the 2009 bottom?

WLT Monthly

There are number of qualifications I'll be looking for as confirmation from a technical perspective. First and foremost, the 9.88 price zone must hold. Second a series of higher highs and higher lows. Third I'll be looking for momentum on a 3-Month time frame to kick in. Lastly for longer term potential, I'll be watching for a stage 1 base here where the 30-WK moving average catches price, flattens out, and turns up. From a fundamental factor I'll be looking for some form of catalyst that indicates a shift. Currently one noteworthy factor has been the amount of insider buying.  The assumption here is the these insiders have insight into the company and future prospects and by ponying up their own capital on the open market they are leaving a clue as to what they see on the horizon.

WLT Insider Buy

ACI has also had a recent insider buy as well. This is one way I'll be looking to weed out some of the laggards in this sector from potential leaders.

ACI Insider Buy

While not coal, FCX a copper/oil play is also showing some characteristics of a stock that might be bottoming.

FCX Monthly

In addition there has been some major insider buying to the tune of ~100M over the past few months. As with WLT, I'll be looking for similar characteristics as to a change of character and perception. Currently momentum has shifted positive on a three month time frame so it meets one of my criteria as of now. Going forward I'll be paying attention to a volume shift that indicates to me there is increasing demand suggesting that the undergrowth on the path of least resistance has been cut back.

FCX Insider Buy