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Coal Plays in the Wake of Nuclear Power Debasement

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In a post-Fukushima Daiichi world, investors are increasingly focused on global coal producers as well as the heavy-machinery makers of coal mining extraction equipment.

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Editor's Note: Fore more valuable insight from Mike Paulenoff, visit MPTrader.com.

I'm watching coal and coal stocks closely in the aftermath of the Japanese earthquake and tsunami crises, as the future of nuclear power generation is discredited and the cost of petroleum-based fuels skyrockets. Notwithstanding the emissions issues, more abundant and safer coal for energy use in electricity generation in a post-Fukushima Daiichi world increasingly focuses investors on global coal producers, as well as the heavy machinery makers of coal mining extraction equipment, such as the companies that comprise the Market Vectors Coal ETF (KOL).

On March 24, KOL broke out of a 10-week bullish consolidation pattern and closed at 49.74, just a few cents shy of making new three-year highs. From a pattern perspective, the upside breakout has the right look of the start of a new up-leg within the major uptrend that began in November 2008, at 9.43, and which should trigger upside continuation into new high territory above 49.80 towards a projected intermediate term target in the vicinity of 53.50.

Among the larger KOL components -- CONSOL Energy (CNX), Joy Global (JOYG), Peabody Energy (BTU), and Bucyrus International (BUCY), individually comprising around 8% of the ETF -- each displays a very powerful uptrend pattern that points still higher. Meanwhile, Walter Energy (WLT) and Alpha Natural Resources (ANR) are just now breaking out of multi-month sideways (bullish) consolidation patterns that, along with the above-mentioned larger components of the KOL, have the potential to drive the price of the ETF considerably higher in the days directly ahead.

Without a doubt, however, all eyes should be focused CONSOL Energy (3/24 close: 55.49), the largest component of the KOL at 8.4%, which is approaching a test of its January 2010 high at 58.00. If hurdled and sustained, this should trigger upside follow-through and acceleration towards a next target zone of 63.00 to 66.00, and possibly on the way to 70.00-71.00 ultimately.

The price path of CONSOL Energy will have a meaningful impact on the strength of the KOL, which exhibits a much stronger intermediate-term chart pattern than CONSOL Energy, owing to the performance of the other ETF components, especially the mining equipment makers Joy Global and Bucyrus. If CONSOL Energy takes out its January 2010 high, then the KOL should take off in reaction to the upside breakout of its largest component.

Mike Paulenoff is author of MPTrader, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial!


Lasting through April 15, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.
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No positions in stocks mentioned.
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