Patriot Coal (Symbol: PCX) the down and dirty coal play

Patriot Coal is a small coal mining company that has been pummeled from its highs of $80 in June to its current level of $15.50. There are many reasons for the strong sell off but the most pressing may be that everyone knows Barack Obama is no friend to coal…and he has made that very clear.

But within the wreckage of this 80% decline in stock price are some glimmers of hope…

1)The most impressive is the fact that CEO Richard Whiting recently made a large purchase of stock (see arrows on the chart below) and now owns 240,000 shares. The last times Mr. Whiting bought shares, in November 2007 and May 2008, the stock price rallied significantly in a relatively short period of time.

2)The MACD has been steadily upward sloping since its -7.5 reading and is currently at -3.8.

3)While the entire stock market came under aggressive pressure during the month of October, this stock consolidated sideways during the month and has now formed a good base on which to build.

4)As election day quickly approaches and Obama is likely to win the election, the bad news is already built into the stock price.



















Expect PCX to continue to gyrate in this area, possibly with more volatility, until at least a few days after the election with the possibility of some more downside pressure if Obama does win as expected. But given the reasons above, look for PCX to hold its own very soon and into the end of the year. Then ultimately look for a stock price in the mid to upper $20’s, which would take the stock back near its 200 day moving average.

HAPPY TRADING!