Consol Energy, which I wrote about in the beginning of October, has not only risen above its all-time high at $28.27, as I was expecting, but also gained even more than 30% jumping to $36.23. Shares of the coal producer were rising within the upward channel rooted on April 30 and the upper margin crossing $29.40.
A breakthrough of the price above the upper margin gave Consol Energy stocks an additional boost to the new target area of $36.00-36.20. Also, a convergence on several oscillators between the highs of October 11 and October 18 has emerged forming a reversal pattern “Double Tops”, which has prompted a correction.
As for now Consol Energy shares have met their correction targets, and dived below the 7-month upside trend, at least the EMA13 and EMA21 moving averages on the daily timeframe are still above the price that indicates a downward pressure.
So, how deep might a further correction reach since stocks have made a 50% correction already? I see two major scenarios.
According to the first scenario prices may experience a strong decline considering the “Head and shoulders” pattern that is being formed on the chart. It is visible on daily and weekly timeframe charts with a 50% on Fibonacci retracement acting like a neckline, even it is pitched down. However, to finally confirm this pattern we need the price to hold below $21.50 per share. If this is confirmed, we will have a significant correction potential of 80-100% of the “Head” height that leads us to a long-term price target at $10.00-10.50.
The second scenario considers the “Hound of Baskervilles” trend continuation formation appearance after failure of the “Head and Shoulders”, “Reversed Head and shoulders” and “Diamond” patterns-like formation. The first signal for this scenario would be a continuation of rising prices after an existing correction breaking through the second “shoulder” top at $25.95. At this point the second “shoulder” is not complete and would be completed and confirmed only after reaching the $21.50 landmark.
I would suggest the first scenario would not be the one I would bet on as the demand for coal is strong ahead of the winter season.
According to New Hope Corp., a large Australian coal exporter, the demand for coal will remain strong for at least two more decades even considering the fact that countries around the globe are moving towards decarbonisation. Moreover, the company suggests that the demand for coal in India, Vietnam and Japan would exceed the supply in the coming quarter.
A breakthrough of the price above the upper margin gave Consol Energy stocks an additional boost to the new target area of $36.00-36.20. Also, a convergence on several oscillators between the highs of October 11 and October 18 has emerged forming a reversal pattern “Double Tops”, which has prompted a correction.
As for now Consol Energy shares have met their correction targets, and dived below the 7-month upside trend, at least the EMA13 and EMA21 moving averages on the daily timeframe are still above the price that indicates a downward pressure.
So, how deep might a further correction reach since stocks have made a 50% correction already? I see two major scenarios.
According to the first scenario prices may experience a strong decline considering the “Head and shoulders” pattern that is being formed on the chart. It is visible on daily and weekly timeframe charts with a 50% on Fibonacci retracement acting like a neckline, even it is pitched down. However, to finally confirm this pattern we need the price to hold below $21.50 per share. If this is confirmed, we will have a significant correction potential of 80-100% of the “Head” height that leads us to a long-term price target at $10.00-10.50.
The second scenario considers the “Hound of Baskervilles” trend continuation formation appearance after failure of the “Head and Shoulders”, “Reversed Head and shoulders” and “Diamond” patterns-like formation. The first signal for this scenario would be a continuation of rising prices after an existing correction breaking through the second “shoulder” top at $25.95. At this point the second “shoulder” is not complete and would be completed and confirmed only after reaching the $21.50 landmark.
I would suggest the first scenario would not be the one I would bet on as the demand for coal is strong ahead of the winter season.
According to New Hope Corp., a large Australian coal exporter, the demand for coal will remain strong for at least two more decades even considering the fact that countries around the globe are moving towards decarbonisation. Moreover, the company suggests that the demand for coal in India, Vietnam and Japan would exceed the supply in the coming quarter.
