Don’t Be Scared of Chesapeake Energy Corporation (CHK) Stock!

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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.

Don’t Be Scared of Chesapeake Energy Corporation (CHK) Stock!

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
Source: Charts by TradingView

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.

Looking forward, though, I’m drawn to calling more attention to price action that I previously referred to as a triple-bottom or CHK stock’s “real bottom line” on the price chart.

Today, the prior description looks a bit more like a lower-low consolidation. And coupled with Fibonacci support continuing to hold and now a fairly decent bullish divergence in stochastics, a low in CHK stock is a much more reasonable assumption.

Further, with Chesapeake’s daily stochastic condition (not shown) signaling even stronger secondary support, I say go ahead and take a look for yourself. Then, if you’re in agreement, look out and up slightly with a limited-risk long call strategy.

CHK Stock Long Call Strategy

Reviewing CHK stock’s options and shares at $4.72, one such opportunity is the Oct $5 call priced for 45 cents. Risk is set at less than one-tenth of owning CHK stock outright, so there’s little harm there.

As well, with an earnings event next month, plenty of time on the calendar and given Chesapeake’s notorious volatility, this play looks all the more sweet for bulls in search of some honey for their trading accounts; and without incurring a lethal sting if wrong.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/07/dont-be-scared-of-chesapeake-energy-corporation-chk-stock/.

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