NEW BULLISH Plays

Patriot Coal - PCX - close 13.68 change +0.12 stop 12.90

Target(s): 15.25, 15.95
Key Support/Resistance Areas: 15.30, 14.15, 13.00, 12.50
Current Gain/Loss: Unopened
Time Frame: 3 to 4 weeks
New Positions: Yes, see entry point below

Company Description:
Patriot Coal Corporation (Patriot) is a producer of coal in the eastern United States, with operations and coal reserves in Appalachia and the Illinois Basin. It is also a producer of metallurgical coal. The Company’s operations consist of 14 mining complexes which include company operated mines, contractor-operated mines and coal preparation facilities. One of its mining complexes is located in northern West Virginia, 12 are located in southern West Virginia and three are located in western Kentucky. Patriot ships coal to electric utilities, industrial users and metallurgical coal customers via various company owned and third-party loading facilities and multiple rail and river transportation routes. (source: company press release or website)

Why We Like It:
As signs of inflation begin to build momentum so are resource stocks. Many coal stocks have lagged compared to other names in the commodities space, but they are showing signs of momentum. PCX is forming a bullish cup and handle pattern and its volume patterns point to building bullish momentum. The stock surged higher on heavy volume in early October and pulled back on lighter volume. Now the stock is finding support at its rising 20-day SMA. I suggest readers use a trigger of $14.17 to enter bullish positions on a breakout. If the stock pulls back prior to breaking out we may consider a lower entry, perhaps near support at $13.00. We are looking for a move up towards the stock's 200-day SMA, or about $1.00 to $1.75 higher than our current trigger.

Note: I consider this an agressive trade and readers should expect volatility. Please use proper position size to manage risk.

Trigger: $14.17

Suggested Position: Long PCX stock at $14.17
Options Traders: Buy December $14.00 CALL

Annotated chart:

Entry on October xx
Earnings Date More than two months (unconfirmed)
Average Daily Volume: 3.6 million
Listed on October 26, 2010