Arch Coal Is Worthless
Dragonfly Capital | Jun 18, 2013 01:54AM ET
Each weekend as I run through my stock charts, I have tweeted the comment “Coal Still Sucks”. What is amazing is that I have been saying that for over 9 months. Over that time, the broad market has gone up a lot, but has also had pullbacks and flat periods. It just does not matter to coal stocks. They only go down. So with that I put forth that Arch Coal (ACI) is worthless. Price target zero. The daily chart below shows the story. A continuing series of lower highs and lower lows.
The Simple Moving Averages (SMA) are moving lower, and all are above the price. The Relative Strength Index (RSI) is bearish and becoming technically oversold. This may lead to a bounce and an opportunity to short it at a higher level. The Bollinger Bands® are opening lower, and the Moving Average Convergence Divergence indicator (MACD) is falling. The Measured Move lower takes it to 3.25. It gets worse. The weekly picture shows a move down out of a descending triangle at 13, to a new base in a bear flag at 5.50. Breaking that flag lower at about 7 provides a target on the Measured Move to 0 (technically -0.50). The 3-box reversal Point and Figure chart agrees with a price objective of zero. What is amazing is that short interest is only 14%.
I guess the shorts were happy enough with the ride from 34 to 4. Yet people still want to buy this stock. 16 of the top 20 Options trades on this stock Monday were in the June and July Calls, and done on the offer. Everyone is playing for a bounce. Here is the fallacy in that play. Even if I give you the premise that the bottom is in (which clearly goes against the argument above), it does not mean it is now going to move higher. In other words, you may point out that some oscillator or indicator is oversold, but you cannot point to one that says buy. So stop trying.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Original post
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