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CHK: Ding-Ding!

Ding-Ding! (As in the bell for round 2 in CHK that rang at the open today, or more accurately, started ringing in pre-market this morning when I highlighted the stock catching a nice bid in pre-market session). By all accounts, today' price action appears to be the start of round 2, with the first round being that 1-day, 49% gain from the last (and official) trade on CHK about 5-weeks ago.

This update is more for those that took a long position in CHK (Chesapeake Energy) today as even if the stock pulled all the way back to retest that wedge tomorrow, I would not add it as an official trade nor suggest taking it, as to erase today's all of today's clearly bullish price action would be extremely bearish. I've overlaid the same daily chart that was posted in pre-market earlier today with the 2-minute intraday streaming chart in which I noticed the stock moving today well in advance of the opening gap.

The second chart is as of the today's close highlighting how this breakout happened to occur with a backtest of the zero on the MACD, which often acts as support when tested from above during an uptrend, and resistance when tested from below during a downtrend. If long CHK and only looking to position for possible quick trade up towards the 5.00 level, consider raising stops to the 4.18 or higher, depending on your entry price & stop allowance. CHK still looks promising as a longer-term trade & may likely be added as an official trade ideas if/when it appears to be poised to mount a solid & sustained breakout above that downtrend line & the 5.00 resistance level.

Apr 11, 2016 5:11pm|Categories: Equity Market Analysis|Tags: |6 Comments

6 Comments

  1. Profile gravatar of snipertrader
    snipertrader April 11, 2016 5:40 pm at 5:40 pm

    Nice call Randy.

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  2. Profile gravatar of jegersmart
    jegersmart April 12, 2016 4:54 am at 4:54 am

    Just to point out (as Randy has numerous times) that CHK are one of those companies that are very highly leveraged and if oil should retrace or struggle to maintain the recent levels may be in very big trouble (if they are not already).
    As you are all probably aware, the market these days are full of “experienced” traders who actually have no experience of anything pre-2008. The current bullishness around the OPEC meeting next week where they are going to discuss a production freeze has been enough (ala the Fed posturing) to get folks all moist with anticipation. My own view is that one should bear in mind that a) a production freeze will do nothing to reduce oversupply and maybe more importantly b) a number of the OPEC countries have been increasing production quite dramatically in the last couple of months, so even if a freeze is agreed, and even if that freeze is actually acted on and held, the production will behigher than it was even 2 months ago before this freeze that won’t do anything to reduce the overall oversupply.
    Just a few points I think may be important to keep in mind.
    J

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    • Profile gravatar of snipertrader
      snipertrader April 12, 2016 8:32 am at 8:32 am

      @jegersmart – I agree with your sentiments – everyone should keep in mind that these market conditions are particularly precarious, difficult to call/judge and warrant caution at every turn/action. Due to CB interventions and potential major inflection / turning points across many asset classes and markets, maintaining higher levels of cash and reduced position sizing during periods like this if/when entering seems appropriate generally speaking. Also sideways markets ( like the S&P is in currently ) are notorious for slicing and dicing under the covers those who enter the waters without properly managing their entries and risk. In more directional market conditions the room for error is larger and the buffering provided by it can help compensate for less than precise/accurate R/R entries and management. We should all keep the principle of being sure to adjust market approach to market conditions and re-assess market approach continually. No single approach will work thru all market conditions. We must all remain adaptable while still sticking to a market appropriate rules based approach. So keeping things “light and tight” is fine at times like these is quite appropriate.

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  3. Profile gravatar of Drummonddrive
    Drummonddrive April 12, 2016 9:30 am at 9:30 am

    FYI. CHK successfully restructured their debt. That’s what behind this move. Cheers. I’m thinking ECA might play catch up.

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  4. Profile gravatar of lee1
    lee1 April 12, 2016 10:11 am at 10:11 am

    Great call Randy. Why did you not tell me to by this one as opposed to WMB? LOL I guess one should buy all your plays as some will be big winners while picking and choosing can miss these big winners.

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    • Profile gravatar of rsotc
      rsotc April 12, 2016 3:42 pm at 3:42 pm

      I know that you were kidding Lee but just in case you didn’t see it, I had pointed out CHK in trading room before the market opened yesterday & stated that I was considing adding it as an official trade if the entry was objective as do my best to add trade ideas either in advance of breaking out (setups) or during market hours if the have already broken out. I started scaling in during pre-market as it was apparent that something was going on, plus, more importantly, that bullish falling wedge looked ripe to pop with CHK just above the former T1 support level, it couldn’t get much better than that as far as an objective entry. Unfortunately, (for those that didn’t catch or act on that pre-market heads-up), CHK gapped up well above the top of the wedge & never came back in for a backtest or near-backtest, which is where I would have added it as an official trade. Just wanted to share that & I’ll do my best to try to provide some more lead time on the next CHK. 😉

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