Arch Coal Inc. (fka ACIIQ)

[mr_bitterness]

ACI touched on the support of a 6 month trendline today. 3 lows and each one below the SMA200.

$32.98 on 1/23 ... a 27% correction
$37.82 on 3/20 ... a 32% correction
$47.75 today ... a 38% correction

Today was the only one of those lows to be a down day. In all, the chart looks much worse today than it has on either of the 2 lows that touched this trend.

With the new .09 dividend and the earnings report in the morning it could be a big day in either direction. There is plenty of room for a bounce in the charts. $58+ would be a quick guess. But THE immediate downtrend is so strong that enough of a break of that support could make $45 the first stop. It could all take a couple days to pattern out but with earnings right now this should be really interesting.

Ultimately: By raising the price of coal, they can get it to the users more quickly. So ultimately ACI should come out ahead. $80 - $100 in a year or less seems reasonable to me.

Demand for coal is unstoppable. Look at them trying to control demand for oil. If you're not out driving, you're either home using electricity, our out using someone else's electricity. And China is making millions more just like you everyday.

Below is from a 7/23 interview with Roger Wiegand (a man I know nothing about). Link to the rest comes at the end. More on power plant demand and transportation.

... RW: I have one more new one I like, and that is Arch Coal (ACI). Coal is definitely in short supply — not from the problem of reserves; they’ve got plenty of reserves — but the problem is they can’t move it fast enough. Transportation with ships, trains and trucks is quite difficult right now, in that load and unload facilities and the amount of rail lines facilities they’ve got for handling the coal are probably where they were 10 years ago.

Meanwhile, this market’s grown rapidly, overwhelming ability to transport the materials. They might have a shortfall industry delivery capacity of 15% to 30%. So, the pressure is on. Two years ago in Wyoming, where they mine clean power plant coal, shipping to the eastern US, coal dust had been flying off their unit trains enroute. You have three or four engines pulling 150 to 180 loaded open top cars, and once they get up to speed, coal dust flies off and covers the rail roadbed.

So what happened was they had rainstorms, and the combination of coal dust and rain took out rail support from under a train and rolled it over. That caused a big mess, costing millions of dollars to repair. But they did fix it, and immediately got busy with an expansion in Wyoming. The rail operator put in new load/unload facilities, a third track in Wyoming (they had two) and now they’re running trains at the rate of 70 a day, where they were moving them previously at a rate of about 40 per day. That’s a big increase in transport production.

When that accident happened, there were some eastern U.S. power plants down to a panicky 60-day supply of coal, which, in their view, is critical. Normally, they have a six to eight months' supply on-hand.

China is in an even worse condition right now because they have been building or adding on — believe it or not — one new power plant a week in China, and they now have 32 power plants shut down because there is no coal to operate them. They can’t import and move coal fast enough. And the next thing is — get this — the whole country of China has only a 12-day coal supply. With the Olympics coming, I think that is really scary. I am sure somehow they will divert enough coal for the Olympics region, but that is a pretty crazy situation.

TGR: So this would be a short-term trade, if you’re expecting--?

RW: No, I think Arch Coal is going to be a longer-term trade. It’s the kind of trade for a shorter and longer term. It’s a moving stock being quite active for a larger company. We’ve gotten out of it on profit-taking, in the letter. I think we made like $12 or $13, which was a nice move, but it will come back, and is now starting to take-off again. There’s no let-up on coal demand for years. Investors in the buy and hold longer group would like Arch Coal and will the traders.

... from ...

http://seekingalpha.com/article/85855-roger-wiegand-part-ii-commodities-provide-a-hedge-in-turbulent-times