Price Bubbles Always Burst: Arch Coal Heads to the Price Downside

Arch Coal (ACI), a leading coal producer with mining operations in Colorado, Kentucky, Utah, Virginia, West Virginia and Wyoming, on July 31, 2008 closed at $56.31, down 24.49 percent from its all-time high of $74.57 set on June 23, 2008.

From September 27, 2001 to May 10, 2006 ACI soared from $7.04 to $54.10, a 668.47 percent gain. The stock corrected to $28 on August 3, 2007 and then peaked at $74.57, a 166.32 percent gain in just nine months.

Does the current price drop represent the beginning of longer-term downside or simply a price correction along a longer term upside? No one knows for certain, but all commodity prices eventually decline and when coal prices head down, ACI will follow.

I (RAH) do not own ACI.

Posted August 1, 2008.