We have the oil inventories out tomorrow, which could move that market, but we suspect that there is bigger news out there later in the year to do that. Near-term we will be stuck in the $80 price range and longer-term $100/barrel. Commodities have been hard hit recently, with many sectors having a good many players near their 52-week lows at some point in the past month. When the economy turns, commodities will be where investors want to be. We continue to build up our cash position in order to begin buying as opportunities present themselves.
We have seen some interesting trading in the coal stocks over the past few trading sessions with the smaller players rallying on days the bigger players are slightly down. It is not significant yet, but we are waiting to see the big players get hit hard together before we buy and it feels like we are closer to that event than not right now. Patriot Coal (PCX) was up $0.25 (20.00%) yesterday to close at $1.50/share on volume of 12 million shares. The stock has bounced off of its lows set in recent trading, and has done this on days when bigger players such as Alpha Natural Resources (ANR) are not moving higher along with it. We said yesterday we were not moving into Patriot Coal yet due to the downside and we will stick to that as it is probably short covering at this point. Investors should wait to have the big blue chip plays taken out by the bears before getting bullish, and that is how we are playing the industry.
Alpha Natural Resources was down in trading yesterday as shares fell $0.38 (4.31%) to close at $8.44/share on volume of 12.6 million shares. We are not yet bullish here either, we think that shares recently saw strength as a result of their recent weakness, believe it or not. Contrarians moving in as the shares broke below $10/share and fell almost to $8/share before taking off and failing to take out the $9/share level. If we cannot get some inflation going and the appearance of progress in Europe and China, then we might very well see this one trade down to the $6/share range. We urge everyone to wait for these to bottom out and give a clear sign that they are moving higher as an industry.
Vale (VALE) continues to show strength and maintain the $19/share level, which is pretty impressive considering the run-up the shares have had in the past week or so. Yesterday we saw shares fall $0.05 (0.26%) to close at $19.36/share, but that hardly tells the story. Shares opened much lower in the morning before spending the entire day working its way higher to the close. We think that this was a strong showing, especially considering the worries which were going through the markets yesterday concerning economic growth and the weakness in commodities markets.
As impressed as we are with Vale, we also are interested in the strength of Freeport-McMoRan (FCX) as of late. Yesterday saw the shares lower by $0.08 (0.23%) to close at $34.26/share on volume of 12.4 million. Volume has gotten weaker, but the shares have gotten stronger. And like Vale, not all down days are created equal. If we can get some resolution in Europe, we can see this rally significantly. We envision that this stock could go on a run similar to the one it embarked on as the economy came out of the financial crisis - assuming of course that the company is not severely hampered by the upcoming rulings on their operations in Asia and Africa. If the market can give us some economic certainty, we will certainly go bullish on this one.
One of our worst calls of 2012, check that our worst call of 2012, is showing a bit of life now. We have seen Potash Corp of Saskatchewan (POT) rise off of its lows lately, but volume has been lacking. It is on par with the rest of the market in that regard, but it makes us wonder about the conviction behind the move. At the end of the day up is up and that is all that matters. Shares closed up $0.39 (1.01%) to close at $38.99/share yesterday on volume of 3.6 million. The three month average for volume is in the neighborhood of 5 million plus, but it appears this is more a function of the summer months than anything else. We would like to see this one break above the $40.share level to set itself up for further movements higher.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.