Investors continue eschewing coal and coal stocks. The futures-based GreenHaven Coal Fund (NYSEArca: TONS), which is designed to offer investors with exposure to daily changes in the price of coal futures contracts, has decreased 3.6%.

The Market Vectors-Coal ETF (NYSEArca: KOL), which tracks equities, has tumbled 12.3% this year. That after falling 22.7% last year and 20.9% in 2013. KOL has not closed higher on an annual basis since 2010. Some may be tempted to catch the falling knife as the economy still depends on coal to meet growing electricity needs, but short covering could be the most legitimate near-term catalyst to drive KOL and coal stocks higher. [Dim Outlook for Coal ETFs]

“Coal firms had an average of 3.5% of shares out on loan 18 months ago, a number that rose to a high of 7.5% in the opening week of April. The build-up in short interest over the last 18 months was a slow and steady one, with a brief pause in the closing months of last year in the wake of the US midterm elections,” according to Markit note posted by Barron’s.

The research firm goes on to note that short interest in coal stocks has ebbed a bit in recent weeks saying, “Arch Coal has seen the most of covering as short interest is now down by a quarter from its recent highs, falling below the 15% mark for the first time since March 2013.”

Arch (NYSE: ACI), which is now a penny stock at 53 cents with a market value of $113.3 million, is 0.4% of KOL’s weight. Alpha Natural Resources (NYSE: ANR), another KOL holding that has seen dwindling short interest, is now the ETF’s second-smallest holding at a weight of 0.34%. Alpha Natural closed at 52 cents with a market value of $115.7 million on Wednesday.

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