Aug 27, 2010 10:04 AM PDT
Our enthusiasms for Arch Coal Inc. (ACI) - and coal stocks in general - dates all the way back to May 12th. It just so happens that now, it's supported by a true bull signal. Perhaps more importantly, this particular trading system has yielded huge success with ACI shares.
As for potential upside, it's difficult to say... it depends on your timeframe. We do think Arch Coal shares could make their way back up to the $28/$43 range (between 2005 and 2007) within a matter of weeks or months. A complete recovery to the 2008 peak in the high $70's may take a little too much time to justify holding it that long.
In either case though, the excessive dip from last year - and some tempered bullish acceleration since December - means now is a great entry point for an ACI position.
Though the buy signal for Helmerich & Payne Inc. (HP) was triggered by a weekly chart, the daily chart here is a little easier to decipher. So, let's look at it instead.
The proprietary trading system employed here looks for a combination of volume trends, momentum, and also well-paced acceleration - to avoid buying stocks that are overbought. Helmerich & Payne look a little overbought by most standards, but in the grand scheme of things they aren't... HP has made a healthy breakout.
The $36.00 had been a ceiling since May, tested four times before the fifth attempt from HP a few days ago finally broke past the hurdle. Though a little further ahead of its short-term moving averages than wed normally like to buy at, Helmerich & Payne has already taken care of the more pressing (and more meaningful) matter - the trading range has been broken.
Here's the weekly chart of HP, if you really want to see the bigger picture.
----------------------------------------------------------------------
Sign-up for Free to Receive Future Commentary and
Trading Alerts on PCU, ACI, HP, and MRO.
----------------------------------------------------------------------
Southern Copper Corp. (PCU) is the only bearish/short signal with today's batch of ideas, and confidence is low in the likelihood of any downside. That fact that the stock is up today isn't a major deal for this weekly chart system, but it's obviously not a help either.
What the bears do have working on their favor with Southern Copper Corp. shares is a trading range - albeit bullish - that PCU just hit the upper edge of. If history holds up, the stock should be making its way back to the $23 area or so. Like we said though, confidence in our odds with this trade is low.
Why? We're simply going against the grain by betting against a basic materials company when the sector's trend is bullish. Maybe PCU would be a good edge though. Just be cautious (though there's also a lot to be said for sticking to your proven system).
And finally, Marathon Oil Corporation (MRO) is showing up as a high-odds buy, though it's another low-confidence scenario. Wait - scratch that. It's not that confidence is necessarily low. It's that the possible reward may or may not justify the risk of stepping into a Marathon Oil Corporation trade at this time. (Believe it or not, the failed signals from late 2007 and mid 2008 aren't a major concern... the wind is at our backs at this point.)
Since these system-based signals are designed to find multi-week (or multi-month) holdings, we can afford to be patient with MRO. The key here will be getting above resistance between $33.20 and $33.60.... both have been recent ceilings for Marathon Oil. Once we see that happen, then this chart will have made a much stronger buy pattern.
The $45.00 area would be a good checkpoint target.
Just as a reminder, these system signals are not the same thing as our official trading recommendations. The official picks (which are monitored for exits) are only available to subscribers of the free newsletter. That said....
If you'd like to know of any changes in our opinion of ACI, HP, MRO, or PCU (or if we officially recommend them as trades), be sure to sign up for our free newsletter today. It's delivered 2 to 3 times per week.
