Coal Plays in the Wake of Nuclear Power Debasement

By Michael Paulenoff

I'm watching coal and coal stocks closely in the aftermath of the Japanese earthquake and tsunami crises, as the future of nuclear power generation is discredited and the cost of petroleum-based fuels skyrockets. Notwithstanding the emissions issues, more abundant and safer coal for energy use in electricity generation in a post-Fukushima Daiichi world increasingly focuses investors on global coal producers, as well as the heavy machinery makers of coal mining extraction equipment, such as the companies that comprise the Market Vectors Coal ETF (KOL).

(To see Peter Atwater's article on municipal debt holders and GE, click here..)

On March 24, KOL broke out of a 10-week bullish consolidation pattern and closed at 49.74, just a few cents shy of making new three-year highs. From a pattern perspective, the upside breakout has the right look of the start of a new up-leg within the major uptrend that began in November 2008, at 9.43, and which should trigger upside continuation into new high territory above 49.80 towards a projected intermediate term target in the vicinity of 53.50.

(To read Professor Pinch's article on European sovereign debt woes, click here.)

Among the larger KOL components -- CONSOL Energy (CNX), Joy Global (JOYG), Peabody Energy (BTU), and Bucyrus International (BUCY), individually comprising around 8% of the ETF -- each displays a very powerful uptrend pattern that points still higher. Meanwhile, Walter Energy (WLT) and Alpha Natural Resources (ANR) are just now breaking out of multi-month sideways (bullish) consolidation patterns that, along with the above-mentioned larger components of the KOL, have the potential to drive the price of the ETF considerably higher in the days directly ahead.

(To view Justin Rohrlich's on Chinese counterfeiting rings, click here.)

Without a doubt, however, all eyes should be focused CONSOL Energy (3/24 close: 55.49), the largest component of the KOL at 8.4%, which is approaching a test of its January 2010 high at 58.00. If hurdled and sustained, this should trigger upside follow-through and acceleration towards a next target zone of 63.00 to 66.00, and possibly on the way to 70.00-71.00 ultimately.

(To read the rest, head over to Minyanville.)