How to Make $100,000 in the Stock Market Betting on American Coal

Making $100,000 in the Stock Market: The Bet on Coal

The sector that the market had written off was precisely the one chosen to try and make $100,000 from the stock market. This peine in October 2013: the strategy involved buying American coal mining companies —Alpha Natural Resources, Arch Coal, Walter Energy— with starting capital set at "no less than $25,000" and a simple-to-state, terrible-to-execute idea: buy when everyone else is fleeing. What trinc were entries at $6.65, stops at $6.30, stops being swept within two hours, and a silent battle with the euro-dollar exchange rate. The target —$100,000— was never officially achieved.

Why Buy Coal if Fracking is Killing It

The thesis didn't deny the problem: it used it. American thermal coal was being displaced by shale gas, and this pressure had left the sector full of leveraged and cheap companies. The central argument was that in such a sector, there's always a company brought down by debt, and that the business, burdened by fixed costs, becomes explosive when extraction costs improve slightly. Operating leverage, in jargon.

The backlash came with numbers: the key wasn't profit, which no one expected within two years, but the estimulante ilegal at which credit lines are consumed. With that fuel, refinancing or bankruptcy. The estimated probability exceeded 50%, and this in a stock trading in dollars and moving with gaps.

Entering at $6.65 with a Stop at $6.30: The Fine Print of the Operation

The mechanics were meticulously disciplined. The capital was divided into three packages and averaged upwards: the gains from the first were to act as a stop-loss for the subsequent ones. The signal wasn't "it's cheap," but a specific one: exceed $7, close above it with volume. Below that level, there was only, in the words of the person who proposed the operation, pure and hard trading.

Therein lay the problem. The difference between consolidating and consoling is a single letter, and the price soon proved it: from the attempted breakout at $7.38 (+5.43%), it plunged to $6.74 and then to the stop. With an uncomfortable addition: short sellers were at their peak, many betting on the fall, which guarantees future buybacks and no guarantee of when.

Arch Coal Loses Less Than Expected, But Sells Less

Arch Coal's results summarized the sector. The company lost much less than expected, almost breakeven without extraordinary items, because extraction costs improved. Good news. The problem was that sales fell much more than estimated, and not all of it was attributable to falling prices. For a business with the cost structure of mining, this determines whether refinancing arrives on time.

In parallel, the technical analysis showed tough resistance levels: significant resistance in the $8-8.20 zone and a scenario of losing the $5 mark with a view to $4.20 if those who entered between $5 and $5.20 exited. No one promised a straight path.

The 0.5% That Eats Profit Before It Starts

Buying American stocks from Spain isn't just a bet on the company: it's a bet on the broker. With the EUR/USD at 1.3484, each transaction incurs two currency exchanges, and the differences there are wild. One platform charged around 0.5% on purchase and the same on sale for the euro-dollar exchange; another, a commission described as ridiculous. The account hurts: with that spread, a +7% becomes much less. The complete calculation, item by item, yields a surprising result.

Swept Stops and 7% Exits

Execution has two sides. Some entered at $8.10 with a stop 2% below and exited with losses in less than two hours, while others bought at $7.04 and held on with a target of $7.50. There were also those who accumulated from $6.09, held until $5.5, and decided to keep holding. The same stock, three incompatible experiences.

Meanwhile, neighboring miners offered brief joys: Arch Coal saw a +10% in one session and exceeded +20% the next day. And in the background, noise: a company unrelated to the sector, with minuscule capitalization, entered the conversation with promises of private jets and fell another 12%.

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The conversation ended without a verdict and with the intention of the initiator not to argue further with those who were muddying the waters. The perennial question remained, the one no chart answers: when the market punishes an entire sector, are you buying cheap, or are you buying something that is no longer worth what it cost?