As a follow-up to the recent ANR trade setup, I just wanted to share the fact that shortly after that post, I tweeted out a handful of other coal stocks that look poised to rally; $CLD $NRP $ACI $SXC $BTU $JOY $WMLP
I've included my daily chart for ACI here which shows a recent breakout above a bullish falling wedge pattern, along with three potential price targets (actual resistance levels, unadjusted for an optimal fill. Sell limit orders to be set somewhat below these levels).
ACI is not an official trade idea at this time as I'm waiting to see how USO/crude follows thru after today's breakout but official or not, I wanted to share some of my favorite names in the coal sector as a short-covering rally as well value buyers/bottom pickers coming into some of the beat-up coal stocks is certainly likely, should crude prices (an alternative/competing energy source to coal) continue to move higher.
I also wanted to share my reply to a question that I received from someone that was considering averaging down on a position in ACI:
(begin reply): Some traders won't average down on a losing position, instead only averaging up on a winner but I have no problem doing so when the charts confirm (never out of pure emotion or flawed logic that the stock "must" or "will" come back sooner or later).
With that being said the points that I impressed on ANR that hold true to ACI:
1) As a near-penny stock and especially with the fundamental issues (primarily low coal prices & hence, cash-flow/profitability issues with these companies), the risk of dilution or possibly even a bankruptcy filing is a reality with ACI, even more so than when it was trading at 3.28 last fall when energy prices were higher & they probably had a much stronger balance sheet.
2) As bullish as the chart of ACI looks to me at this time (fyi- I tweeted it out as one of my favorites shortly after the ANR post & I personally bought some along with all those other names), is the fact that the success or failure of these trades (coal stocks) will hinge largely on whether or not I am right that oil prices have already seen their lows.
With all that being said, once again I am bullish on ACI and although I can't advise you on what to buy or sell or how much of it if you do, just make sure that you are comfortable with the position size that you take, just in case you wake up to a 40%+ gap down on the stock.
FWIW, I think a long here on ACI with a stop below .98 - .96 looks objective. My first target is 1.35. (end reply)