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The weekly chart for the coal sector below tells a pretty straightforward story of a bearish breakdown from a period of consolidation. The 2010 lows are suddenly within reach, leading me to believe that if the coals could go there, then they probably will. On Wednesday, we saw massive selling volume and devastating percentage losses in individual stocks, such as ANR down over 17%. So, there is the consideration that we have just witness capitulation. If that latter scenario is going to happen, then we should see strong hands enter the arena to close out this week, and/or by no later of the middle of next week. If we do not see heavy put sales, call buying, or straight up equity purchases in a major way, then the retest of the 2010 is a foregone conclusion.
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Liking the idea of looking for put sales in this selling of coals. Will also look for Risk Reversals as I like this strategy over straight put sales. To think on Monday I wanted to short WLT on its weakness relative to the market last week, another hindsight trade for the books.