NEW DIRECTIONAL CALL PLAYS

Walter Energy - WLT - close 72.45 change +0.77 stop 52.95

Company Description:
Walter Energy, Inc., formerly Walter Industries, Inc., is a producer and exporter of metallurgical coal for the global steel industry and also produces steam coal, coal bed methane gas (natural gas), metallurgical coke and other related products. The Company operates its business through three principal business segments: Underground Mining, Surface Mining and Walter Coke. The Company’s primary business, the mining and exporting of hard coking coal for the steel industry, is included in its Underground Mining segment, consisted of Jim Walter Resources, Inc. (JWR) and Blue Creek Coal Sales, Inc. In its Surface Mining segment, it also mines steam coal for sale to industrial and electric utility markets through its Taft Coal Sales, Tuscaloosa Resources and Walter Minerals subsidiaries. Through its Walter Coke segment, it manufactures furnace and foundry coke, collectively referred to as metallurgical coke. (source: company press release or website)

Target(s): 77.25, 80.95
Key Support/Resistance Areas: 77.75, 74.50, 72.50, 70.00, 68.50
Time Frame: 1 weeks

Why We Like It:
I believe the sell off in coal stocks was overdone and they appear to be building momentum for a move higher. WLT has retaken its 200-day SMA at $72.50 and also has solid support at $67.85. Our stop will be just below at $66.50. The stock could find some resistance near it 20-day SMA but I believe it will bust through this level if the market has in fact found some footing. I would like to see some retracement in the recent gains and use $71.25 as a trigger to enter long positions. I am looking for a move up to $77.25 and possibly $80.95. I view this trade as aggressive and quick so please use small position size to manage risk.

Suggested Position: June $75.00 CALL if WLT trades down near $72.65, current ask $4.30, estimated ask at entry $3.60

Annotated Chart:

Entry on May xx
Earnings Date: More than 2 months (unconfirmed)
Average Daily Volume: 3.7 million
Listed on 5/25/10