Previously downtrodden mining and materials exchange traded funds have rebounded in significant fashion this year as highlighted by the Market Vectors-Coal ETF (NYSEArca: KOL), which is up more than 32% on a year-to-date basis.
KOL strutted its stuff yesterday, rising nearly 3.8% despite news of Peabody Energy (NYSE: BTU), once the largest U.S. coal producer, filing for bankruptcy protection. The coal industry is weakening as U.S. power plants switch to natural gas, environmental restrictions take hold and the world makes a stink eye at heavy greenhouse gas energy sources, reports Tom Randall for Bloomberg.
The ongoing shale oil boom has pressured natural gas prices and made natgas a cheap alternative to coal. Additionally, new environmental regulations have forced coal-fired power plants to close, and many are being replaced with natural gas.[related_stories]
Moreover, China, the world’s largest consumer of coal, is beginning to diminish its reliance on coal in favor of alternative renewable energy sources as pollution becomes a major concern and clean energy becomes cheaper.
“It is painfully obvious that the bears are in control of the long-term trend, and the chart is a textbook style example of how the resistance of the 200-day moving average (red line) can act as a strong barrier to any chance of a reversal. Active traders will likely use the move toward the resistance as an opportunity to enter a position because it offers a risk/reward scenario that hasn’t been possible since late 2014. The declining MACD indicator and cross below its signal line will also be used as confirmation of a continued move lower and at this point long-term bulls will likely want to remain on the sidelines until the price can close above the resistance levels for several consecutive trading sessions,” reports Investopedia on KOL.
According to Bloomberg analysts, about two-thirds of money spent on adding new electricity capacity worldwide will go to renewable between now and 2040.
“Coal is one of the hardest hit areas in the broad commodities market, and many are starting to wondering if it is time to take the contrarian view and start forming a position,” adds Investopedia.
Market Vectors Coal ETF