I've received several requests from readers over the past week as to my thoughts on the coal miners, and whether I think they're nearing a bottom. To begin, nearly every coal stock is currently positioned somewhere between incredibly oversold and horrifically oversold. That said, their charts look generally atrocious. And if one were going to long them at the present time, trade initiation would have to be based on something other than technicals (or a bullish setup).
Two of the only coals stocks not currently on death's doorstep are Westmoreland Coal (WLB) and Alliance Resource Partners (ARLP). To be clear, however, I have no interest in either stocks. I only mention them because if you're looking for two of the only coal companies not currently trading in the single digits, these are the ones.
As far as the more popular names are concerned, they all look horrible. Names like Walter Energy (WLT) and Alpha Natural Resources (ANR) have lost between 80% and 90% of their values over the past year. Even those thought to be of higher quality, like Peabody Energy (BTU) and Consol Energy (CNX), are off 59.5% and 14.5% respectively.
The bottom line is that oversold tends to get (and stay) more oversold in a bear market. And the coal stocks, like many mid- and small-cap energy stocks, are in torturous bear markets. Some companies will no doubt survive and rise from the ashes. But as a largely technical-based trader, I see no reason to guess and gamble on which ones will ultimately survive.
If you're stalking the coal sector for long ideas, allow the technicals to be your guide. Short-term traders should focus on shorter duration moving averages such as the 8-day and 21-day exponential moving averages. Intermediate-timeframe traders should allow the 50-day simple or exponential moving average to be their guide, while long-term traders and investors should base their decisions on the 150-day and 200-day simple or exponential moving averages. If nothing else, simply allowing the time for the price to recapture the moving averages that most closely resembles your timeframe will put you in closer alignment with the overall trend.
1. Turning our attention to light crude oil, the commodity finished last week displaying very little in the way of bearish excess. Both the daily and weekly charts appear destined to break and trend lower. Regardless of timeframe, I would continue to avoid this market on the long side.
2. I've written bullishly on both gold futures and the gold mining sector since the end of 2014 and beginning of 2015. But in the interest of keeping an open mind, I believe it's important to note the close proximity of the declining 30-week and 40-week moving averages on the gold futures contract. Whether you opt to use a simple moving average or exponential average is of little importance. The bottom line is we are quickly approaching these pivotal long-term moving averages. As traders auction gold up toward $1,245 to $1,255 (the approximate location of the aforementioned moving averages), over the coming days and weeks it'll be important to remain as unbiased as possible. Failure to sustain a break (on a weekly close) above $1,255 would be an obvious problem.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at email@example.com or posted to my twitter feed @ByrneRWS.