Wednesday, June 12, 2013
WLT Walter Weekly and Daily Charts Oversold Falling Wedges Positive Divergence
The coals have been battered mercilessly for the last couple years. Cheap natty gas has taken over as the fuel of choice since gas is cleaner-burning as well. Over the last year, natty gas has recovered moving higher in price enabling coal to start thinking about basing. Coal is separated into steam coal and met coal. About 90% of the U.S. coal is steam coal for electricity generation. ACI, ANR and BTU produce a lot of steam coal camp. Met coal is important for steel production. ANR and WLT are geared towards met coal. WLT is likely the most leveraged to the steel industry.
KOL is the coal sector ETF and it has taken a drop over the last couple days due to an analyst downgrade of the entire sector on Friday. All the coals were hit by the negativity. The timing for knife-catches is critical and it is never helpful for an analyst downgrade to occur when a long trade is entered. Interestingly, analysts are typically a fade since they issue upgrades when a stock is peaking, and issue downgrades after a stock is already beaten down and basing. The WLT weekly chart is set up favorably with positive divergence, a falling wedge with price now at the apex, and oversold conditions, all indicating that a launch move should be on tap. WLT has fallen from 130 to 15 bucks in 18-months time. On the daily chart, same dealio with the falling wedge behavior, oversold conditions and positive divergence, however, money flow slipped yesterday back to the weak and bleak side. The negativity the last couple days has also created some very short term downside momo. The coals in general should all base moving forward and continue along sideways with a sideways up bias for the weeks and months ahead. This behavior would hint that natty gas prices may at least stabilize at current levels and not give up much ground to the downside. The white circles show capitulatory-type selling where the die-hard long holders of WLT are throwing up their arms and giving up on the stock. This behavior typically indicates that a bottom is near.
The coal sector should be considered for long opportunities here forward but the initial ride may be bumpy. Projection is sideways to sideways up moving forward for WLT and the coal sector in general. Keystone is currently in WLT and KOL on the long side. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
Note Added 6:17 AM on 6/13/13: Commodities are battered with a global sell off in equities occurring. WLT is hit -4% in the 6/12/13 session ending at 14.03 with positive divergence on the weekly chart remaining clearly in place despite the beating. KOL (coal sector ETF) is also sold off -4%. Copper, oil, gold and silver are all hit but coal receives the majority of the beating.