Is the the Breakout You’ve Been Waiting for in Coal? KOL

I’m seeing increased chatter about Coal stocks and ETF KOL regarding a potential breakout and larger reversal.

Let’s take a quick look at the Weekly and Daily Chart to highlight the key levels to watch, potential targets, and try to answer the question “Is this THE breakout?”

First, I’m showing a longer-term weekly chart of the coal ETF symbol KOL.

We can see a persistent and relentless DOWNTREND beginning in 2011 at the $ 50.00 per share high and potentially ending with a larger Double Bottom price pattern at the $ 17.00 per share level (2013 and early 2014).

Aggressive traders enjoy calling market bottoms while more conservative traders need a little more ‘proof’ or evidence of a potential reversal.

Notice what’s happening now – a breakout above the falling 50 week EMA which is something that has not happened throughout the entire downtrend.

I zoomed-in the perspective to highlight the breakout – it’s the image at the top right of the chart (above $ 19.50).

Here’s a closer look at the Daily Chart of KOL:

We do see the Double Bottom pattern with positive divergences at the start of 2014 which developed at least an initial bullish swing up toward $ 19.00 per share.

A sideways rectangle developed through the next few months and buyers pushed price higher above $ 19.00 in August, triggering the current breakout.

Note that Volume and Momentum also confirmed the breakout (they spiked higher along with price).

Should KOL continue the breakout, the next key target beyond $ 20.00 per share is the prior swing high near $ 20.50 per share.

Price could move quickly through the “Open Air” (no known resistance) and would be in the bullish green zone beyond $ 19.50.

Otherwise, a Bear Trap and reversal play would develop on a failure and return back under $ 19.00 per share.

Keep these levels in mind as we study the chart for additional bullish clues from price.

Corey Rosenbloom, CMT
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