I still can’t justify owning Chesapeake Energy Corporation (NYSE:CHK), but please don’t be scared either. With everything looking so bleak for CHK stock these days, it’s actually a good time to look for a more bullish cycle to emerge.
Let’s be clear, CHK stock is laden in debt. It’s a problem for sure, writes InvestorPlace’s Dana Blankenhorn. For the record, oil prices are in a bear market.
For its part, the United States Oil Fund LP (ETF) (NYSEARCA:USO) is off 21% and just removed from its year-to-date lows. Worse, “Texas Tea,” as some have fondly called the commodity in days past, is trading at prices not supportive for Chesapeake’s longer-term viability as a company.
Now for some good news: Everybody and their brother is aware of the issues facing CHK stock, including one too many analysts on Wall Street. Those problems, while they may seem like end-of-the-world stuff, are more likely to pass, as they typically do over the course of a news, business or some other natural cycle.
My soft proof, as I’m not particularly keen on reading into volatile weekly inventory reports, actually lies outside the market. It rests on the honeybee and CCD, or colony collapse disorder. How on earth does that relate to CHK stock?
You might recall less than a couple years ago, CCD was a very bleak scenario in which the honeybee population was disappearing and on track to devastate our food supply. The alarm bells, not unlike those in CHK stock these days, were rung in force by a media all too willing to gobble up what more than a few smart folks with PhD’s after their names had to say.
It turns out, they were dead wrong and the bees are doing much better. I believe the bee story to be an interesting anecdote, but also one that plays out much more often than not. At the end of the day, fear sells; even when it most always turns out to be dead wrong.
So for the record, here I am as a turncoat bear warning others to not “bee scared” of CHK stock. Whether it’s the latest supply cheating within OPEC, CHK stock’s debt or the most recent inventory data that has you worried — don’t. And if you can’t trust what my intuitive gut is telling me, trust the CHK stock chart, as it’s already hinting at a different and more bullish narrative.
CHK Stock Weekly Stock Chart
Click to Enlarge In looking at the weekly chart of Chesapeake Energy, it’s obvious being a bear the last couple months wasn’t without merit.
A breakdown of trend support and a failed counter-trend rally in the form of a bearish flag are the two glaring warnings I personally wrote about in the past.