Coal pricing is pushing fast and hard. Along with so many other commodities, emerging markets are largely responsible for increased demand for coal due to booming populations and economic growth. In China and India, coal demands are expected to increase 10% and 20%, respectively, in 2011.
With this sort of increased demand, the age-old question of "Can supply meet demand?" is back at the forefront of discussions. One thing is certain: the window of opportunity is wide open for U.S. coal miners as China is the world’s leading coal producer and looking across the globe for acquisitions or reserves.
Financing is always a key element as mining isn’t cheap, but Tennessee-based Americas Energy Company (OTCBB:AENY) has at least temporarily bridged that issue with news today of a $2-million line of credit through their new growth partner, Hanhong New Energy Holdings, a subsidiary of Hanhong Private Equity Management Company Limited.
The monies will be earmarked for expansion of AENY’s Artemus Project and Hwy 72 Deep Mine Projects in Southeast Kentucky. With the funds, the Company plans to bring two of its four permitted deep mines online and estimates production of approximately 20,000 tons of clean coal per month from each of these mines by the end of the third quarter.
Technically speaking, the AENY chart looks to have found a bottom in late March when the share price dropped to touch a dime. After a week of treading water slightly above that level, shares surged on big volume to challenge the 50-day moving average (dma) and peak at 31 cents. A classic consolidation has followed throughout April with a new support at 16 cents forming and holding as a new higher low.
Shares are once again on the climb this week; rising from $0.16 to break through the 50 dma (at $0.22) in intraday trading today posting gains approaching 20 percent greater than Tuesday’s close. The break of the 50 dma is a sign of bullishness as the share price will now face more resistance at the old $0.31 high with additional strong resistance not entering the picture again until near 41 cents.
Classic and much-used indicators such as the Moving Average Convergence/Divergence (MACD) and Relative Strength Index (RSI) are also showing signs of strength in the chart. The MACD is quickly approaching zero, which is widely-regarded as "the money line" due to a rise in share value typically accompanying the MACD approaching and breaking it.
The MACD trending over top of zero is a strong bullish indication. The RSI(7) has now broken through 70 with the longer-term components, RSI(14) and RSI(21), trailing behind and pointing upward. Momentum traders refer to RSI readings above 70 as "the power zone" as momentum is extremely strong to break above that mark.
A merging of strong fundamentals and technical aspects is a tough match to beat, but, as traders say "news trumps all." In the case of AENY, it appears that the three have aligned simultaneously and if the business model can stay its course, Americas Energy Company just may have found itself a share price bottom last month. Due diligence is always encouraged and investors should consult a financial advisor prior to making any stock trades.
