Coal is the dirtiest energy in the world. Everyone knows it.
Politicians hate it.
ESG funds wonโt touch it.
Analysts have been calling for its demise for decades.
Despite all that, coal remains one of the most important energy sources on the planet.
Most power grids worldwide still rely on coal. Even in the United States, which prides itself on being an energy superpower, coal remains a significant and persistent component of the electricity mix.
The truth is that modern life still runs on coal. Now, with the AI Revolution driving an explosion in power demand, the old fossil fuel is once again finding itself in the spotlight.
We spent last week talking about uranium and nuclear energy. Those clean fuels are making historic moves as the world scrambles to meet this new wave of demand.
Coal tells a similar story. It might not be shiny or clean, but it works.
For years, fund providers have been the best contrarian indicator for black diamonds:
Here is the ASC Coal Index in black, compared with the old VanEck Coal ETF KOL in blue.
Between 2018 and 2020, coal stocks collapsed in a brutal bear market. That crash ended in early 2020 and set the stage for one of the greatest bull runs in coal's history.
Look what happened right before it took off. VanEck delisted its coal ETF.
Investors lost their best way to participate at the exact moment they needed it most. That is why we closely monitor ETF delistings. They consistently provide us with some of the most powerful signals in the market. Just before the best uptrends begin, the ETF disappears.
Coal gave us one of the clearest examples.
Now fast forward...
Following the massive bull market, the ASC Coal Index reached its peak in early 2024. What did the industry do this time? They launched a new coal ETF.
Range Global rolled out its Coal ETF $COAL right as the index topped out.
This new fund perfectly nailed the peak:
Since Range Global launched its new Coal ETF, coal stocks have gone nowhere.
ETF providers tend to introduce products to the market when they are most easily sold. The problem is that those launches typically occur when investors should be selling, not buying.
The story of coal makes that clear as crystal.
First, they delisted the old ETF at the bottom. Then they launched a new one at the top.
Today, the ASC Coal Index is pressing against the upper bound of a multi-year range. The price has been churning sideways since the ETF's launch, but now it appears ready to move higher.
A breakout here would mark new 52-week highs, and a fresh leg higher will likely follow.
Keep scrolling for the Commodities Trade of the Week, where we have outlined our favorite setups in coal stocks.
Grains - Commercial hedgers added over 26,000 contracts to one of their largest net-long Soybean Meal positions ever. This suggests the producers believe the prices are cheap, and the downside risk is limited from here.
Fixed Income - Commercials added to their massive net-long US 10-Yearposition, and added to their historic net-short US 30-Year position. The smart money is continuing to bet on a bear steepener in the bond market.
Crypto - After carrying their largest net-long position ever, the commercial hedgers have flipped net-short Bitcoin. Historically, bearish positioning in the digital Gold by the smart money has been a major headwind for crypto bulls.
This week, we're outlining two of our favorite equity setups in the coal space.
First, let's dive into the names that are leading:
This table includes the components of the Range Global Coal ETF $COAL, filtered by proximity to 52-week highs. We've also included the distance from 52-week lows.
As you can see, most of these stocks are still in double-digit drawdowns from their respective 52-week highs. However, we've seen some major moves off the lows in names like Ramaco Resources $METC, Peabody Energy $BTU, and Hallador Energy $HNRG.
Alliance Resources $ARLP, Natural Resources $NRP, and Suncoke Energy $SXC have been the biggest laggards in the group.
Most of these stocks have carved out textbook accumulation patterns and look poised to enter brand-new primary uptrends.
For the Commodities Trade(s) of the Week, we're outlining our favorite setups that look ready to blast off.
Premium members can see the entry and target levels below. ๐
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