Check Out The Chart: A Lump of KOL, Please

The Market Vectors Coal ETF (NYSE: KOL) is not only the king of the coal ETF world, it's also one of the easiest ETFs to explain in terms of performance. Good market setting + high demand for raw materials = Good times for KOL. Risk-off + waning global growth = An invitation to get out of KOL.

Such is life in the world of high-beta materials stocks and that explains why the Market Vectors Coal ETF's chart looks like a war zone. Actually, there are some fundamental issues here as well that have made KOL's chart the epic disaster it is. In the past two weeks, three of the ETF's top-10 holdings – Alpha Natural Resources (NYSE: ANR), Walter Energy (NYSE: WLT) and Arch Coal (NYSE: ACI) – have announced earnings or production warnings.

From its August high over $50, KOL cratered to a 52-week low of $27.42 just a few days ago. In the process of that wicked decline, every moving average of consequence was violated along with several psychologically important support areas.

Looking at the chart shows us KOL actually has not violated its downtrend line and has found support from it. The ETF is now showing some faint signs of life, bouncing off that support and moving higher thanks to the broader market.

KOL can rally hard and fast and it has done that this week. The ETF is now pushing $32 after hitting $27.42. That's good, but further chart examination shows the ETF is now caught in the middle of downward sloping channel, the top end of which is $35. In other words, KOL is going to face stiff resistance at $35 and it would be a bullish sign for the ETF to clear that hurdle on strong volume.

Risk/reward from $32 to $35 isn't great because the downside is about $4.60 compared to $3 of upside, but if $35 is broken, KOL would see no resistance until $38.

In that vein, KOL's RSI is still trawling along an area that would indicate the ETF is oversold. A rally of more than $4 in a just a few days and KOL isn't overbought. That may indicate there is a lot more upside here as KOL corrects its oversold condition.

For now, KOL is a technical play because its constituents' fundamentals have been damaged a little bit. Just check out the chart.