• Chart of the Day: Walter Energy, Inc. (WLT)

    by  • May 30, 2013 12:55 pm • Charts to Watch, Quick Hits, Tony Venosa's Chart of the Day • 0 Comments

    Today’s chart is of Walter Energy, Inc. (WLT) which produces and exports metallurgical coal for the steel industry.  It also produces thermal and industrial coal, anthracite, metallurgical coke, coal bed methane gas, and other related products.

    Ticker:  Walter Energy, Inc. (WLT)

    Recommendation:  Short Trade

    What I Am Looking At:

    • Huge underperformance, down more than 51 percent year-to-date and 64 percent year-over0-year
    • Underperforming its peers in the coal sector
    • Market Vectors Coal etf (KOL) continues to underperform the broader market, down nearly 17 percent year-to-date
    • Shares successfully broke through the round number $20 level which has had significance in the past
    • During the past month shares have carved out a bear flag formation, hitting resistance at the declining 40-day moving average and the round number $20 level
    • Short interest has risen 57 percent during the past month, representing nearly 27 percent of the float, as short sellers seem to be in strong control
    • The open interest put/call ratio stands at 0.46 indicating calls outnumber puts by a margin of 2 to 1
    • Despite WLT’s underperformance, option players remain optimistic as the 10-day call/put ratio exceeds 3.50 which ranks in the 80th percentile of all readings taken during the past year
    • Quarterly revenue growth (yoy) -22 percent and quarterly earnings growth (y0y) -221 percent

    Strategy:  Sell the current breakdown of the bear flag



    Tony Venosa, CMT is a Senior Options Strategist and works on the trading desk at Schaeffer’s Investment Research. He joined Schaeffer’s in 2010. He has worked in the finance industry for over 15 years. He began his career as a trading assistant in Chicago on the floor of the Chicago Mercantile Exchange. He later moved upstairs and worked as a commodities broker on both the retail and hedging side. He left the brokerage industry to begin his trading career as a proprietary equities trader at a Chicago firm. In 2000, Tony moved backed to his hometown and continued trading his personal account. He later went on to earn his Chartered Market Technician designation. He earned a B.S. in Finance from Miami University. Tony’s main focus is short-term directional option trading.


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