Book 50% Profits Off This Dead Cat Bounce…

Dead cat bounce is one of my all-time favorite market expressions…

The imagery is hard to beat. And we don’t have to waste a whole lot of time explaining what the heck it means. Anyone with even a dull spark in his noggin can probably figure it out.

But just in case you’re feeling a little groggy this morning, I dug up this handy chart that should answer any questions you might have:

Dead Cat Bounce

Most investors fear getting caught up in a dead cat bounce when they attempt to play a comeback move in a beaten-down stock.

But today, I want you to do your best to ignore these fears. That’s because I’ve found a dead cat bounce play that could hand you gains of 50% or more over the next 12 months. This corpse has a lot more spring in its step than your average flagging feline—and its already sneaking up on new 2016 highs as I type…

I’m talking about coal.

The coal industry is dying. The black, sooty stuff is finally going the way of the dodo bird.
Thanks to waves of new regulations and a push for cleaner energy sources, coal’s slowly going extinct.

Coal’s not even consistently the top source of electrical power in the United States anymore. More than one year ago, natural gas trumped coal as the top source of electric power generation in the U.S. for a couple months…

We’ve tried time and again to play a coal bounce over the past few years. But we’ve had no luck. Coal’s been one of the worst investments out there. One of the main reasons? Investors believe the government’s been trying to kill it off in favor of greener alternative energy.

They’re right. Obama’s Environmental Protection Agency has said power plants must reduce their emissions of carbon dioxide 30% by 2030. It was a declaration of war on coal. And it was the last straw for investors…

But just when it looked liked things couldn’t get any worse for coal, prices started plunging once again. Coal plants shuttered. And demand from China tanked. Since 2011, coal stocks have gone nowhere but down.

Even though it continues to generate a significant portion of this country’s energy, coal’s definitely become one ugly investment. It’s been downright impossible to make money off the stuff on the long side.

Until now…

The coal sector has come back from the dead in 2016. After languishing for years, these stocks have finally put in a bottom. The VanEck Vectors Coal ETF (NYSE:KOL) hit a low of $5.24 in January. It’s trading over $9 this morning…


Amid the bankruptcies in the coal industry and falling energy prices, these stocks are finally turning up.

Keep in mind, coal stocks will never return to their former glory. This is an industry that is slowly on its way out the door. The government is regulating it to death. And better, cleaner sources of energy are stepping up to the plate.

But we do think this dead cat bounce has legs. The rebound in natural gas prices also help our cause. When natty was below $2, utilities were burning it instead of coal. Now that natural gas prices are on the rise, there’s more incentive to burn off the stockpiles of the sooty stuff. That should at least help stabilize things in the short-term…

No one’s paying attention to coal this year. But it could quickly turn into one of the most lucrative comeback plays on the market—even if it is just a dead cat bounce.


Greg Guenthner
for The Daily Reckoning

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Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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