It was fun while it lasted.
The trades I described in coal in the wake of news of investments by George Soros seem to be coming to a decisive end. The recent bottoms have not yet given way, but seems sure to do so in the coming days or weeks.
Arch Coal (N:ACI) has swung particularly wildly as news about ACI debt has steadily crushed the stock since it reached toward the highest point of the Soros buying range. ACI is extremely oversold here, but I am not interested in trading against the headwinds of crushing debt.
Arch Coal (ACI) plunges toward its recent all-time lows as debt news issues a steady pounding.
Peabody Energy (N:BTU) tried to resuscitate interest in its stock with a reverse split. The stock has not swung nearly as widely or wildly as ACI, but it is still heading for a challenge of all-time lows. A post-earnings reaction generated a whopping 21.8% one-day loss.
Peabody Energy (BTU) confirms a fresh breakdown from resistance at its 50-day moving average (DMA)
CONSOL Energy Inc. (N:CNX) added to the negative catalyst for coal stocks with an earnings report that generated a 21.2% loss. CNX is now at a 13-year low. I stopped buying puts against CNX weeks ago as I (wrongly) figured it was no longer worth riding the downtrend once the stock hit single digits. CNX tried to encourage investors, but they clearly were not listening and/or unimpressed:
“Despite depressed commodity prices, CONSOL remains focused on achieving our free cash flow base plan over the next 15 months,” commented Nicholas J. DeIuliis, president and CEO. “During the quarter, we beat production targets, locked in a significant percentage of our revenues for 2016 with additional gas hedges and multi-year coal contracts, significantly reduced operating costs, corporate overhead, and legacy liabilities, and accelerated our asset sale monetization program. These steps provide increased confidence in our ability to achieve our free cash flow base plan that we highlighted during our second quarter 2015 earnings call, and we are hard at work with multiple processes underway to monetize additional assets this year and into 2016. Expected proceeds will go towards reducing debt to help accelerate the separation of our Coal and E&P Divisions.”
CONSOL Energy (CNX) takes a fresh plunge in reaction to earnings.
With momentum freshly pointing downward for coal stocks, these stocks are once again hot potatoes, falling knives, etc… I am not interested in making any long trades until a fresh, positive catalyst appears. It will be interesting to see whether Soros decides to double down. In the meantime, the trade points definitively down once again for coal stocks. The upshot is that whatever the trend, these stocks are good for strong and sustained follow-through for good risk/reward trades.
Be careful out there!
Full disclosure: no positions