CNX Hits New 52-week High — Up 93% since Buy-Signal!!

14 October 2009; market open (The previous issue was broadcast on 10/9/09)

Preemptive Profit-Positioning:

CONSOL Energy (CNX NYSE): $51.05 X $51.07

On 29 October 2008, I announced a preemptive buy-signal on CONSOL Energy (CNX) at the $26.59 per share level. With more than six decades of coal reserves, CONSOL Energy is the largest underground producer of high-Btu coal in the United States.

In May of this year, I stated, “CONSOL Energy appears on-track to post strong operating results in the second quarter, building upon a solid Q1 highlighted by a 71% boost to operating cash flow on the strength of a 37% increase in realized prices. My projection of CONSOL Energy (CNX) surpassing the $50 per share mark by the mid-point of next year may now happen much sooner.”

That statement has now proven exactly correct as, during today’s trading, CNX reached a new 52-week high of $51.36 per share – representing a standing gain of approximately 93 percent. Although we are maintaining our stance that CNX should be held for the longer-term, we are also recommending that partial profits be protected at current price levels as conflicting sentiment in the coal sector could produce a temporary pullback in equity prices.

For example, last month, Citigroup boosted the coal sector citing recovering domestic demand for thermal coal and a 43% increase in projected coking coal prices for 2010 and 2011. Conversely, around that same time, Macquarie Research downgraded the coal sector to neutral citing continued erosion of domestic thermal coal demand through replacement by cheaper natural gas and a falloff in Chinese demand. And finally earlier this month, Barron’s released a bullish report on the coal sector – including positive commentary on both CONSOL Energy and Peabody Energy – citing a projected 55% increase in coal usage over the next 15 years based on increasing demand in China and India.

We remain bullish on the coal sector and we see CONSOL Energy as a sector leader that should continue to provide solid long-term shareholder value. Protect partial profits on CNX shares; hold the remainder of your position for the longer term; there is no protective sell-stop in place on this trade.