Chesapeake Energy: A Stock That Could Pump Much More

In addition to analyzing the stock market’s overall performance, running scans when the market opens and after it closes is a good routine to follow. It can reveal some market activities you may not have thought about.

It’s interesting to note how many stocks from the Energy sector made it to the StockCharts Technical Rank (SCTR) scan I run every morning. While equities are still trying to figure out which way to go, crude oil prices have risen steeply. And energy stocks are running higher along with it.

FIGURE 1: SCTR SCAN RESULTS. Many stocks that made it to the SCTR scan on September 12 were in the Energy sector. Chart source: StockCharts.com. For educational purposes.

One of the stocks that showed up on the scan is Chesapeake Energy (ticker symbol: CHK). If you extend the chart to display a year of data, you’ll see that the trend has been relatively slow and steady.

FIGURE 2: CHESAPEAKE ENERGY STOCK HAS BEEN TRENDING HIGHER SINCE JUNE. The stock has room for more of the upside move, although an increase in volume would be more confirming.Chart source: StockCharts.com (click chart for live version). For educational purposes.

The stock has been trending higher since June, and its SCTR score is above 70. The relative strength of CHK relative to the S&P 500 ($SPX) is climbing, although it’s still relatively weak. The stock still has some room for upside movement, and the company pays out dividends to shareholders.

Note: To know how much the company will likely pay in dividends, check out the Symbol Summary page under Member Tools.

Go through the charts of the stocks that made it to the SCTR scan and identify those that meet your trading criteria. Last week, Diamondback Energy (ticker symbol: FANG) was the featured stock in this blog. It’s still a scan candidate.

As long as the Energy sector continues to trend higher, it’s worth adding some energy stocks to your portfolio. There are two sides to the coin. One is that crude oil prices are on their way to reaching triple digits. The other is that if crude prices go much higher, demand pressures will come into play. Consumers will feel the pinch when they fill their gas tanks. Some analysts question whether there’s enough buying to push oil prices higher.

A good proxy for following crude oil prices is the United States Oil Fund (USO). The weekly chart below shows that price continues to rise. The first major resistance level would be at around the $90 level.

FIGURE 3: UNITED STATES OIL FUND (USO) IS A GOOD PROXY TO FOLLOW WTIC CRUDE OIL PRICES. After a steep fall in 2020, oil prices have recovered. How much higher will they go remains to be seen.Chart source: StockCharts.com (click on chart for live version). For educational purposes.

Trading Chesapeake Energy

Chesapeake Energy’s stock has been rising steadily since June, but, except for a couple of volume spikes in August, volume has been relatively average. You could take advantage of the rise in oil prices by adding CHK or any other energy stock you have identified. For CHK, look for an increase in volume, because you want to see some momentum behind it.

Watch the crude oil market via the futures ($WTIC) or USO. This will help you keep track of the energy market, which will help you decide whether you should reduce, add, or close your positions.

SCTR Crossing Scan

[country is US] and [sma(20,volume) > 100000] and [[SCTR.us.etf x 76] or [SCTR.large x 76] or [SCTR.us.etf x 78] or [SCTR.large x 78] or [SCTR.us.etf x 80] or [SCTR.large x 80]]

Credit goes to Greg Schnell, CMT, MFTA.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.