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Turning A Lump Of Coal Into Profits

When oil prices are high everyone thinks energy independence. Coal- the black sheep of fossil fuels, is back in vogue with investors. Despite being considered one of the dirtiest forms of generating electricity, Coal is back thanks to new technologies. 

Burning coal creates some problems. Lots of sulfur dioxide and other particulate matter is emitted into the atmosphere when coal is burned.

23% of the electricity created for consumption in the US comes from coal, and since this particular fossil fuel is plentiful, there's a tremendous effort going on to develop "Clean Coal" technologies. The technology is there now. It's just a case of making it cheap enough to economically feasible.

There are 4 different technologies that fall under the umbrella of the phrase "Clean Coal". They are: Capture and Storage of CO2 emissions, Coal Washing, Coal Gasification, and Pollutant Removal. There are great technological strides being made in each of these areas.

The technology that seems to be coming to the forefront most rapidly are techniques for "washing" the coal prior to burning. As you can see from the graphic, the process of washing the coal involves grinding it, immersing it in fluid, separating out the impurities, and then burning the washed coal.

Rising energy costs and the belief these new technologies could bring coal back to the forefront as a growing source of fossil fuel to power America.

This renewed interest in coal has led to a major resurgence in the large cap coal companies- check out the charts of these stocks over the past year:

• Alliance Resources (AGHP): up 121%
• Massy Energy (MEE): up 143%
• Patriot Coal (PVR): up 174%
• Penn Virginia Resource (PVR): up 174%
• International Coal Group (IOC): up 181%

When the big boys trade like this, the Juniors come in right behind. Here's today's idea:
 

Liberty Coal (OTC BB: LBTG): New Wyoming Lease Signings Lead to Major Volume

The trading activity in LBTG has been nothing short of astounding in the past three weeks. Trading in a range between $.90 and $1.10, LBTG has all of a sudden starting trading about 300,000 shares on its worst day with drafts to 1 million shares on the bigger days. 

I've rarely seen this kind of volume materialize out of nowhere, so clearly there's some major interest in both the company and the sector.

40% of the coal harvested in the US comes from Wyoming. LBTG recently signed two new Wyoming leases right in the heart of coal country. Based on today's prices, these two leases have recoverable coal that could be worth as much as $1.65 billion in revenues. That's a lot of coal.

Now, I'm not saying this is a company you should marry for five years while LBTG gets into full production. Maybe it will turn out that way. However, I am saying this stock is trading major volume, and if it keeps up, it's a pretty good bet this stock will break out and make shareholders big short term returns.

Look at this chart, and look at the unprecedented level of interest each of the past two Mondays. Two Monday's ago the stock traded 940,229 shares. The next Monday the stock traded 1,021,072 shares. Considering this stock came out of nowhere, that is massive volume.

Looking at the opening prices and ranges, on both Monday's the stock opened, traded, and closed within 5 cents of the first trade. 

Here's how I see- with this kind of volume, there's a really good chance this stock is due to break out. Maybe it will be the third big volume day that gets it going. I can't say for sure. The downside seems pretty minimal. With all this volume, the stock continues to trade in a 5 cent range.

My view- seems like you might be risking 5 cents for a possible 30% to 40% break out. 

I can't guarantee tomorrow will be like the last two Mondays. Even without huge volume, this stock seem pretty stable to me. Certainly worth the risk. 

Unless there's a big gap, I'd advise jumping in at the open. Then use my idea of a GTC limit order. Perhaps $1.25 to $1.30 in case there's a breakout and you're not watching. For an SSL- no reason not to risk 5% to 10% on this one. It appears to be fairly stable.

This could be a real winning trade. It closed at $.95 on Friday. Anything under $1 might just be the ticket to next week's profits.

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