(This is an excerpt from an article I originally published on Seeking Alpha on October 17, 2012. Click here to read the entire piece.)
Consol Energy (CNX) is the U.S.’s largest producer of coal from underground mines. {snip} The charts below show how CNX recently broke out and how it has traded relative to its QE2 and QE3 prices (the price of the stock right before quantitative easing was announced – in CNX’s case, these price coincidentally are the same!).
Source: FreeStockCharts.com
Since the June lows, CNX has steadily churned higher with higher lows along the way. During this time, CNX extended worker vacations, idled mines, and even experienced operational failures. The last announcement of idled production came on September 4th when CNX temporarily idled its Buchanan Mine that produces metallurgical coal and partially idled its Amonate Mining Complex. CNX cited weak global market conditions for steel. Yet, through all this, CNX has manged to rally around 34% from its lows.
So, it is probably no surprise then that the stock suffered so little when the company officially announced on October 15th that it expects to announce a loss in its report on third quarter earnings:
{snip}
However, note that none of these dynamics has won over shorts. Short interest in CNX soared starting in the first half of March. During that time, CNX adjusted sales guidance downward and temporarily idled longwall mining at its Buchanan Mine. The stock fell as much as 10% that day before quickly rebounding to close directly above its QE2 (and now QE3) price. That support finally gave way two months later during the stock market’s May swoon. CNX now trades exactly at its close March 1st, right before shorts ramped up positions.
Source: NASDAQ.com short interest for CNX
{snip}
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on October 17, 2012. Click here to read the entire piece.)
Full disclosure: long CNX calls