Trading update: Coal stocks break out right on cue

A few weeks ago I wrote about three coal stocks that looked ready to break out of bullish chart patterns. This article provides an update on those trades.

On 16 October I noted that bullish chart patterns had begun to form in Arch Coal, Peabody Energy and the Market Vectors Coal ETF (KOL). Since then both Arch and Peabody have broken out to the upside while KOL is still doing battle with overhead resistance.

Arch Coal (ACI)

In my analysis of Arch Coal on 16 October I wrote: “I expect a breakout in the coming weeks towards the 200-day moving average (red line) at around $9. A breakout on high volume would likely represent a decent buying opportunity.”

As the chart below shows, after making a false breakout Arch broke out of its consolidation pattern on high volume before coming back to retest the upper blue resistance which now looks to have been confirmed as support.

A 1 year chart of Arch Coal (ACI) (Click on the chart for a larger version)

A 1 year chart of Arch Coal (ACI) (Click on the chart for a larger version)

Charts courtesy of stockcharts.com

Yesterday’s close at $8.49 ought to provide a nice entry point for those not already long Arch, and although the 200-day moving average at $8.79 could provide some overhead resistance the stock looks set for a decent move in the coming weeks. Stops should be set just below the upper support line at around $7.70.

Peabody Energy (BTU)

In the 16 October article I said that Peabody was “doing battle with overhead resistance at around $26.22… a breakout on strong volume would likely represent a good opportunity to go long the stock.”

As the chart below shows Peabody broke out, retested the upper blue resistance line (which is now support) and then began to move to the upside on strong volume.

A 1 year chart of Peabody Energy (BTU) (Click on the chart for a larger version)

A 1 year chart of Peabody Energy (BTU) (Click on the chart for a larger version)

Charts courtesy of stockcharts.com

For those that missed the breakout Peabody still looks like a good buy at yesterday’s close of $29.28 with a stop loss at the 200-day moving average (red line) at around $27.

Market Vectors Coal ETF (KOL)

As the chart below shows, the Market Vectors Coal ETF, KOL is still doing battle with the upper (thin) blue resistance line and is yet to close decisively above it.

A 1 year chart of Market Vectors Coal ETF (KOL) (Click on the chart for a larger version)

A 1 year chart of Market Vectors Coal ETF (KOL) (Click on the chart for a larger version)

Charts courtesy of stockcharts.com

KOL is one to keep an eye on since a break above the upper blue line on strong volume would represent an decent buying opportunity.

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