Congratulations if you happened to step into Alpha Natural Resources, Inc. (NYSE:ANR), Walter Energy, Inc. (NYSE:WLT), or Arch Coal Inc. (NYSE:ACI) late last week or early this week. They're all up in the meantime, which is saying something... given the lousy market environment. In fact, ACI, WLT, and ANR are three of the market's best-performing stocks today. Now get out. Take the money and run. While it superficially seems a rebound could be underway, this rally was never meant to last.
Just for the sake of knowing, it was Arch Coal that spurred the group's rally. The company explained on Monday morning via a pre-earnings- announcement announcements that it would be posting EBITDA a bit above expectations [which is the equivalent to winning the Super Bowl, for the coal industry of late]. It had also upped its cash stash.
Of course, like any other company, ACI still has to pay the "TDA" portion of the EBITDA line.... taxes, depreciation, and amortization, which is likely to still be bigger than the EBITDA total. Still, it's a glimmer of hope, and investors were more than happy to lasso that (relative) shooting star, and bring Walter Energy and Alpha Natural Resources along with it. All told, ACI is up 29% for the week so far. WLT has gained 21% since Friday's close. ANR has advanced 27% this week. All three stocks have snapped out of technical downtrends in the process.
So why would current owners want to shed these newly-rising stocks? Because the underpinning for their success - the price of coal - continues to be utterly, painfully weak, with no help in sight.
The chart below tells the tale. Thermal coal prices are one again knocking on the door of multi-year lows under $51 per short tons. While at first glance coal prices may seem nothing worse than just range-bound, that range between $51 and $62 is a range where the bulk of coal miners can't turn a profit. The chart of coking/metallurgical coal looks very similar. perhaps a bit worse.
The X-factor: If the price of crude oil and by extension the price of natural gas remain depressed as it appears they're going to do, that's only going to put further downside pressure on coal prices.
Bottom line? Walter Energy, Alpha Natural Resources, Arch Coal, and all the rest may look like winners, but their current rally is apt to end badly, and soon.
Looking for something more actionable right now? Take a look at the SmallCap Network Elite Opportunity service. It trades fast-moving stocks, in addition to providing you daily market insight and close looks at major market trends. You can even get a free two week trial. Just click here to learn more.
No comments:
Post a Comment