Coal in your stocking this year? Nice

The jury is still out on whether or not I’ll end up with coal in my stocking this year.  I returned from the grocery store this weekend sans two critical items from the list, and that seems to have tipped the scales in favor of me finding a shovel full.  Normally I’d be missing the Lindt truffles, but having recently checked the price trends for Coal Futures, I’m not so sure it would be a bad thing to find the soot.

Coal Futures (QL) hit $50.84 in the beginning of September, marking their lowest point since February of 2010.  Since then, Coal has gone on a decent run recovering about 10% over the past 4 months.  The long term prospects for Coal are certainly questionable, with stricter regulations on emissions coming and the cheap cost of Natural Gas.   However, in the shorter term, the price trends are revealing.  We’ve seen this unique price pattern before, and historically investors have reacted pretty consistently to it.

We found 17 highly correlated historical instances of this one year price pattern in Energy Futures (all instances were Natural Gas, Oil, Gasoline and Ethanol), with the first instance being in 1996.  We then looked to see how investors traded in the next 3 months in each of the 17 historical instances.  In 13 of the 17, the price was up in the next 3 months and the average return of all 17 instances was 16.09%.  Also interesting is that for the 4 historical instances that were down in the next 3 months, the average return was only down -3.13%.

Please check out the charts below.  Happy Holidays!

One year price chart (continuous contract) for Coal Futures (QL)

Chart of the 17 highest correlated historical instances of this one year pattern in Energy Futures,

and the average return of those instances in the next 3 months of 16.09%.