How to Profit from the War on Coal
Greg Guenthner

The Economist calls it Obama’s “green gamble”.

However, a more accurate description would be a “war on coal”.

Back in April, I told you coal was still the fuel of the future (and I’m still going through all of your hate mail, by the way). But Uncle Sam doesn’t agree. In fact, the government is stepping up its anti-coal rhetoric. Just this week, the head of the federal Environmental Protection Agency announced that power plants must reduce their emissions of carbon dioxide by 30% by 2030.

But does that mean dirty coal is about to go the way of the dodo bird? Hardly.

“Under its models the EPA predicts that coal will still account for around 30% of American electricity production in 2030 (it is around 39% today),” The Economist explains. “Such forecasting is a tricky business, given the number of moving parts and the economic, technological and regulatory uncertainties.”

Right. Like the fact that emissions are already falling thanks to a major uptick in the use of natural gas from our booming shale operations. That, and a potential 9% reduction in the use of coal over the next 16 years won’t exactly decimate the coal industry…

So maybe all of this “war on coal” business is just talk.

“If Obama wants to dethrone the coal industry so badly, why on earth is the Energy Department rushing to approve natural gas export permits?” our own Matt Insley chimes in. “Seems like in a world where you want to transition from coal, it’s silly to take actions that could increase the price of the substitute fuel, in this case natural gas. Weird.”

It’s clear that even though natural gas is a booming industry, coal is here to stay for the foreseeable future.

But coal stocks have suffered over the past several weeks. After showing signs of life earlier this year, most coal names plummeted in May. Thanks to the war on coal, sentiment is about as low as it can get…

However, I don’t think this trend can last forever. The Market Vectors Coal ETF (NYSE:KOL) is once again attempting a comeback move. The ETF has traded higher every single day this week. If it can sneak back toward $19, you could see a breakout that takes everyone by surprise.

Greg Guenthner

Greg Guenthner, CMT, is the editor of the Daily Reckoning's Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

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