We believe that coal stocks offer investors a unique long-term, value proposition at current prices. The shares in some coal companies have rallied nicely over the last week, and if you are looking for a trade, we suggest you look at the shares of Arch Coal, ticker ACI. (full disclosure: we own shares in ACI in our portfolios and intend to own it long-term) ACI has traded up 38% since the June 26 intra-day low and we think that the technical setup, price action, and volume characteristics suggest that the shares will trade to the swing point of in the range of $8.40 to $8.30, a 12% to 13.5% gain from current prices.
In the chart above, you will ACI's shares have broken through the downtrend line that was established in the beginning of February along with the 20-day exponential moving average. It is also testing the 50-day moving average on a time-weighted trading volume of about 29 million shares, as of this writing, or more than 2.2x the 30day average. The next swing point to the upside is the $8.40 to $8.30 level established on May 2 and May 9, both high volume days. This price level is where we think shares will meet resistance before reconciling the overbought condition on the stochastics.
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