Schaeffer's Trading Floor Blog

Quick Notes on Coal Stocks (BTU, ANR, KOL)

Underperforming coal names BTU and ANR could be poised to keep sliding

by 4/30/2012 11:40 AM
Stocks quoted in this article:

Coal stocks have been rather weak on a year-to-date and a year-over-year basis. This weakness is reflected by the Market Vectors Coal ETF (KOL) -- a basket of coal stocks -- which is down over 3% year-to-date and nearly 39% over the past year. Today, I'd like to show you two names in this industry that look ready to resume their respective downtrends: Peabody Energy (BTU) and Alpha Natural Resources (ANR).

Peabody Energy Corp. (BTU)

  • Extremely weak -- down nearly 10% year-to-date and 55% year-over-year
  • Possible bear flag breakdown could be sign of new leg down
  • 16 out of 19 analysts rate the shares a "strong buy"
  • Open interest is skewed to the call side: 136K calls vs. 76K puts, which ranks at an extreme reading of 95%
  • Over the past 50 days, there have been 2.5 calls purchased for every put
  • Combination of weak technicals and strong optimism = continued downside

BTU price chart
Chart courtesy of StockCharts.com

Alpha Natural Resources (ANR)

  • Very weak underperformer -- down more than 23% year-to-date and 73% over the past year
  • Appears to be already breaking down from its bear flag technical pattern, indicating resumption of downtrend
  • 15 out of 20 analysts rate the shares a "strong buy"
  • Option open interest stands at 117K calls vs. 101K puts
  • 50-day buy-to-open call/put ratio is at 4.20, its most extreme level in the past year
  • Reports earnings before the market opens on Thursday, May 3

ANR price chart
Chart courtesy of StockCharts.com


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