Three Australian energy stocks to watch

By

With the International Energy Agency (IEA) reporting strong growth in coal consumption for 2024 and China reaching record-high coal imports this September now could be the right time to take a closer look at some of the biggest players in the Australian coal sector.

However, before diving in, it's important to assess whether coal's resurgence has staying power or if it's a short-lived trend.

Multiple factors, including delays in renewable energy projects and rising demand from countries like India and China are driving coal's momentum.

three australian energy stocks to watch

Origin Energy has noted that the shift to renewables is not happening fast enough, leading Australia to reconsider the planned closures of major coal plants like the Eraring Power Station to ensure energy reliability.

While efforts to expand renewable capacity are ongoing, delays in key projects like the Snowy 2.0 mean coal could remain a critical part of the energy mix for longer than expected.

So, with global markets facing challenges in their energy transition and growing demand from power-hungry economies, timing your entry into the coal sector could present significant opportunities, especially given the volatility in this space.

Here are three stocks worth keeping an eye on.

Whitehaven Coal (WHC)

A leading Australian coal producer specialising in high-quality thermal coal, Whitehaven has experienced a relatively stagnant share price since early 2023.

The stock has been consolidating in a range between $6 and $9.

With the stock testing $6 in September and finding a barrage of buyers, it's wise to assume the price is heading back toward $9, where resistance is expected.

However, a breakout above this level would be a bullish signal, offering strong long-term upside potential.

New Hope Corporation (NHC)

Specialising in coal mining and exploration, New Hope's stock has been in a downtrend since its peak in October 2022.

However, the stock appears to have found strong support around $4.20, testing this level in September this year.

This was followed by a wave of buyers pushing the price up almost 30% in a matter of weeks. Therefore, if buyer strength holds, the stock could push toward $6.50, representing healthy upside potential.

Yancoal (YAL)

As one of Australia's largest coal producers, Yancoal holds long-term contracts with key Asian markets, including China and Japan.

However, its share price has been range-bound between $4 and $7 since September 2022. A decisive break above $7 would confirm buyer strength and could signal a move toward $12, presenting significant upside potential.

What are the best and worst-performing sectors this week?

The best-performing sectors include Financials, up more than 4%, followed by Real Estate, up more than 2% and Industrials, up more than 1.5%.

The worst-performing sectors include Energy, down more than 2%, followed by Information Technology and Consumer Staples, both down more than 1.5%.

The best-performing stocks in the ASX top 100 include AMP Limited, up more than 19%, followed by Bank of Queensland, up more than 14% and Evolution Mining, up more than 10%.

The worst-performing stocks include IDP Education, down more than 9%, followed by Mineral Resources and A2 Milk, down more than 7%.

What's next for the Australian stock market?

This week, buyers made a strong statement, driving the All Ordinaries index up by more than 1.5%.

What stands out is that this surge breaks the long-standing pattern set in March 2023, where a pullback followed four consecutive weekly gains.

Recognising shifts in market behaviour is crucial, and this one is significant. While it's easy to see this as a bullish signal, it could actually point to the opposite. Let me explain.

Sustainable market moves tend to follow a steady rhythm.

When a market climbs without the presence of sellers, it can drift into a euphoric state-a stage often followed by sharp downturns.

The longer the market rises without a pullback, the higher the chances of a strong reversal. If sellers don't step in soon to bring the market back to a more sustainable pace, we could see a sharp drop to 8300 points.

If that decline gains momentum, it could extend further to 7900 points, a well-tested support level this year. One potential trigger for increased volatility is the upcoming US presidential election next month.

Still, there's no denying that the long-term character of the market is changing.

October, historically a down month, has so far delivered gains, defying expectations. September, typically the worst-performing month of the year, also saw gains.

Given how the bulls have continued to break these historical patterns, it's important to ride the upside momentum while it lasts. Remember, you need to trade based on what the market is doing now, not what you think it should do.

However, stay prepared for any short-term downturns, as they are well overdue.

For now, good luck and good trading.

Get stories like this in our newsletters.

Related Stories

Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.