ACI - Arch Coal Inc. $31.72 +1.36

Sunday's Comment:

With the price of coal more than doubling in recent months, traders have turned up the heat within the coal industry. The real standout in the sector has been ACI, which has added nearly 70% over the last three months. Sound like a momentum play? A look at the daily chart will certainly convince you. What we specifically like about the chart is how traders have been consistently buying on the pullbacks. This note is of importance to us now that ACI seems to be in the process of consolidating. Turning to Friday's action, shares gave up 1.14 points or 3.62% to finish the week at $30.36. Sector related weakness might have been a contributing factor to Friday's fall, as the Standard & Poor's Energy Index (AXE) slipped 2.02% to close at 1584. Volume on the day came in just under the 3-month ADV, as 436,000 shares crossed the tape. Should shares resume an uptrend into next week, we'll look for resistance to emerge at the high of $32, followed by a harder challenge at the $35 mark. Support will come at $30, bolstered by the 5-dma of $29.78. Look for entry points when shares bounce off support or break above the $32 level on midday volume of at least 280,000 shares.

Monday's Update:

Since reporting its rosy first quarter outlook two weeks ago, Arch has seen its stock climb over 10 percent. Moreover, since breaking through resistance at $15 in early February, the stock has more than doubled in price to today's close of $31.72. More importantly, though, we think that ACI has the room to climb higher. To that end, both the MACD and On-Balance Volume are displaying strong momentum buy signals. At current levels, Arch appears to have strong support at the psychologically-significant $30 level followed by the 20-dma at $28. As for overhead resistance, there really isn't any; however, prices near zero and five often provide natural levels of support and resistance, so we would not be surprised if Arch should run into some resistance near $35. With that said, traders considering a position in Arch should look for strong volume, 250,000 shares or more traded by noon EST, on a move through Monday's intra-day high of $32.10 before placing their trades.

Picked on April 5th@ $31.50 Change since picked +0.22 Stop Loss @ $28.25

Play of the Day Index