Quick post; I like coal stocks tomorrow if we see any strength in the market. They’ve been dumped upon, are heavily shorted, and put in nice reversal candles at critical levels today. WLT has also been a favorite for 2-3 day swing trades. This isn’t a high conviction trade, but has potential to be excellent an risk to reward trade. If there’s any continued strength in the market tomorrow I would not be surprised to see 5 – 10% moves in coal names (they are volatile, a 1% move is nothing).
First, WLT had been a favorite to trade with technicals alone. I’m 3/3 lately on WLT which means I should probably stop given that in aggregate less than 1/2 of my trades work out (however my winners are bigger than my losers). That being said, I think WLT still has potential:
- Decent reversal candle today on above average volume
- Reversal came at a key support level ($10)
- Stock is heavily shorted and has fallen quickly as of late. A rising tide lifts all boats, and any market strength could cause a nice short squeeze.
Chart below I also labeled my past three trades, one long and two shorts (numbers 1,2, &3). To be clear, this will likely be a shorter term trade, 2-3 days most likely max, and is not the highest conviction trade, but the risk to reward is very attractive in my opinion.
- Looked like a base was forming, and had a nice breakout but failed at the 200 day SMA. Two stalls at the 200 day SMA was reason to take profits for me
- Bear flag
- Bear flag
- Not the most bullish hammer, but decent volume and strong reversal tells me there’s potential
- If you can get on the right side of a move, WLT has many 2-10 day smooth moves that dont whip around, hence being a great stock to trade.
- Other coal charts also looking good
ANR $5 level seems to be holding
KOL (coal ETF) had a bullish close and looks like it trying to break upwards after chopping around for a while
Basically, if WLT and the other coal stocks can trade above the last two days highs I think there’s a good chance that the move will cause somewhat of a short squeeze and likely attract added support of momentum traders.
Keep in mind Im suggesting a short term bottom may be in, and that is a low probability trade. Manage risk accordingly. Has to make new highs first…
- Brennan Basnicki