Sunday, May 17, 2015

BTU Peabody Energy Weekly and Daily Charts Falling Wedges Positive Divergence

Coal stocks have been devastated under President Obama's vendetta against black gold. The president has destroyed tens of thousands of families across rural Pennsylvania, Ohio, Kentucky, West Virginia, Tennessee and other coal states. Many rural communities are anchored around a coal company as the major employer so the president's hatred for coal has decimated these towns. In addition, cheap natural gas due to new fracking technology continues to bite into coal's dominance in energy production. For decades, coal was the cheapest provider of energy but many plants are now switching over to natty to avoid the wrath of government regulations.

Forgetting about the politics, the charts say that coal is washed out. The weekly chart shows major capitulative selling last September, January of this year and last month as traders give up on coal's future. Even coal miner's desperate for money after losing their job have given up cashing in their coal stocks. The cab driver and shoe shine boy are telling everyone to avoid coal stocks like the plague. The only thing hated worse than coal is the Boston Marathon terrorist bomber.

Both charts are coming off oversold conditions displaying falling wedges (a bullish pattern) and most importantly, universal positive divergence across all indicators for the daily and weekly charts. As a speculator, this is a very attractive set-up for the long side but of course catching falling knives is an extremely dangerous occupation. Prices are under the moving averages desperately requiring a mean reversion higher. Peabody is a very dangerous and speculative trade but the expectation is for a large recovery bounce. Keystone opened a long position in BTU on Friday and will add if the stock drops further. 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 8:15 AM EST on Tuesday morning, 5/19/15: BTU is beaten in Monday trading, 5/18/15, dropping -8.4% to 3.93. Knife-catches are never pretty. Price may want to seek 3.70-3.85 since the 4 level was breached. The above analysis holds for now although the bottoming of BTU may take several weeks due to the bludgeoning. Coal is the most unloved sector and coal stocks are the most unloved in the entire market.

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