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Coal stocks ride China's stimulus wave

September 10, 2012: 1:38 PM ET

Investors who have been burned by holding onto coal stocks this year may finally be feeling the right type of heat.

Coal stocks started heating up Friday, after China announced a $156 billion commitment for improving the country's roads, rails and other infrastructure.

With China planning 55 new major infrastructure projects, investors are betting that those projects will rev up demand for coal, which China uses to make steel for its  bridges. Coal

China's news gave at least one StockTwits trader a reason to pat himself on the back.

upsidetrader: As I said a month ago, China would ease regardless, they cant help themselves, let the bridges to nowhere begin, $XLB$SLX$KOL

CDMCapital:  $ANR very healthy volume the past few days, this might be "the" breakout everyone has been calling for since summer

mjapple: $WLT Coal words of wisdom from Peter Epstein: "The stocks rallied more on optimism about China and Europe then underlying coal fundamentals."

That's a good point. Fundamentally, nothing has really changed.

China has pledged to spend billions on infrastructure, but there are still some pretty big inventories out there. And China's growth forecasts have been shrinking. So this little rally could prove to be just that...a little rally.

Two major coal producers, Walter Energy (WLT) and  Alpha Natural Resources (ANR) are up 6% and 18% respectively over the past five days, but are still down 43% and 62% this year.

AoTrader:  $ANR shorts continue to get rolled. Don't be stubborn here. Price is never wrong.

Price can be wrong but for now at least, things are getting dicey for investors betting on a fall in prices by taking short positions.

CDMCapital  $ANR shorts worried on Alpha, buying continues in the face of poor markets. Still ~ 30+ million shares short

Coal ETFs including Market Vectors ETF (KOL) have also been riding the wave.

paulwoll:  Personally think shorts stuck in $KOL plays and think continuation likely tomorrow so could unwind more Mon/Tues. $ANR $WLT etc.

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Maureen Farrell
Maureen Farrell
Staff writer, CNNMoney

Maureen Farrell is a staff writer at CNNMoney and covers Wall Street, banking, mergers and the stock and bond markets. Prior to joining CNNMoney, she covered venture capital and entrepreneurs for Forbes, and mergers and bankruptcy for Mergermarket and Debtwire, both divisions of the Financial Times.

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