CHK: A Lesson In Sentiment
August 9, 2008 8:46 AM
I mentioned over a month ago that CHK was a short under the high. Period. I also said at least 2 months ago that I strongly believed energy prices would fall - one way or another and that “all energy and commodity stocks were trades, NOT investments. I further went on to say that all energy and commodity stocks would be far lower than they are today. Considering that those two sectors have been ripped in half since, almost literally, my call on that was right on.
Here is a lesson in sentiment. CHK continues to fall regardless of what they report on earnings and/or drilling. Why? Because the “players” have been rotating out of energy and commodity stocks for some time. Remember my supply and demand motto? If there are more sellers than buyers, it will fall and vice-versa. It doesn’t matter what the results are. If people are selling, then they are. People refer to that as sentiment. I refer to it more simply as supply and demand.
On 08/04 CHK got an upgrade to strong buy by one firm. Zacks had an article on 08/06 that CHK Shows Strength. I have one word, well several to say about all that - bla, bla, bla. It is all a bunch of meaningless crap.
I am pointing this out as many people may be long CHK and shaking their heads as it continues to fall. Why? Because people are selling energy and commodities. It is as simple as that. It is the same when I called the top on AAPL in 12/07. A friend wanted to buy weakness in AAPL as “they are a great company” I said “so? It doesn’t matter if they cure cancer and save the world all in the same day, the stock is a short, not long”. That statement may have been a bit dramatic, but I was trying to make a point. Do not ever go against sentiment.
This is why I strongly advocate the charts to provide indications of supply/demand at various price points. It provides indications of what is going on. For instance, I began to notice over a month ago, and mentioned as much, that energy stocks were falling with rising oil. This tipped me off that the players were selling as that should not have been happening. The sentiment had changed, i.e. people were selling.
CHK: Not A Fan But…
August 5, 2008 10:19 PM
It appears that CHK is trying to hold $42.15 here. I believe that was the number that I said to be long off long ago. I didn’t like the reaction today on a huge market move. I would rather wait for a strong buy point here, but $42.15 may hold. It is likely to trade with oil here, so may be difficult to predict. Therefore, I believe it best to wait for CHK to confirm a low here.
If you recall, I made a post titled “CHK is a Litmus Test If You Should Be Trading” as it was an obvious short. It has fallen over 30% since. if you doubt charts, then please just send me your money instead of giving it to Goldman.
CHK: Litmus Test If You Should Be Trading
July 9, 2008 1:17 AM
On 07/03 CHK was a short. Not maybe, not well, I wonder. No, it was a short. Period. I wanted to point this out as you will NOT find any more obvious trade than that - ever. If you cannot see that you should have either exited any long position in CHK or shorted it on 07/03 then you should NOT be in the market on an active basis. And I am 100% serious. Most trades are not as clear cut or powerful. That is why I wanted to use this one to illustrate if you have any idea what you are doing.
I only wanted to bring this up as there are MANY people trading that should not be as they do not understand what they are doing. In fact, I would guess most people that do trade should not be. If you are going to trade, or attempt to trade PLEASE spend time and understand what you are doing before you risk real money. Goldman traders make $3 Billion a year trading for a reason - they take your money. If you do not know what you are doing, you should exit the market and either study FAR more or just invest in mutual funds.
CHK: I Missed the Short
July 8, 2008 12:52 AM
I had not looked at CHK in a couple of days. Sorry about that as it was easy money to short it. It hit a high of $74.00 on 07/02 and reversed in a big way. The strange thing about energy stocks is they have been trading inversely to oil and that is one reason i smelled trouble brewing. It was a “tell” as they shouldn’t have been doing that - but were. I thought…hmmm… I smell selling by the big players here as they should be trading higher - but aren’t. I think they see what I have been saying. If prices stay at these levels, there WILL be a severe recession globally and the stocks will plunge. If oil backs off a LOT, we may avert a recession and those stocks could be in trouble off the highs anyhow. Either way, it was time to sell them, as I have mentioned repeatedly lately.
But that is how I see it and how they have been reacting. They are not trading “normally”, that I know.
Anyhow, we have a key SMA not far below on CHK. I wouldn’t short weakness, unless scalping, as I am not sure the reaction. Shorting strength near the high is a given, but we are a long way from that.
CHK: Careful Chasing
June 9, 2008 10:52 PM
The long on CHK was above $51.50. Chasing here is risky as it could reverse at any time, without warning and i do not like the “gap” reaction to clear the high. While it could march higher chasing appears to be a mistake. Wait for it to roll over here is a safer long I believe. One thing to note is the players never chase. They were likely long above $51.50 and will likely let it ride until proven otherwise. Their risk is minimal and you should do the same.
The Recent Reluctance To Call Shorts
May 18, 2008 1:37 PM
You may have noticed i have said “caution” a number of times, most recently on AAPL, GS and XLF, but have not called for an outright short, other than UPS. The reason is i would rather be short going with the tide of the market. Shorting against an overall uptrend market can work, but the profits are more limited, in general, and you can get whipsawed.
For instance, I saw trouble in both Goldman and XLF on 05/03, but never called the short. I should have, obviously, but I thought the market “may” hold them. It didn’t. However, once the market turns the other direction, and we get short chart patterns like those that formed in GS and XLF, I will go back to outright short calls and remove the word caution. For instance, right now, if the market sentiment (particularly energy) was negative, CHK would be a short right here with a hard stop above $59.60. But I would rather wait until the tide turns a bit…..
You may think my “lightbulb” has been turned off, but I try and make calls where I am reasonably confident that I am correct and I would rather not paddle upstream.
Careful Long CHK Here
May 9, 2008 10:36 PM
CHK has to clear $57.87 to be long up here, so caution is in order. If it sells down, $51 area should provide support. If we get much below that it could get dicey. Obviously oil going crazy has lifted it. It appears extended here, then again so do all energy stocks, but they keep pushing.
CHK Clears $55 …And Spikes Higher
May 6, 2008 10:37 PM
As I posted yesterday about firm numbers that the traders watch for, $55 was it on CHK. Once it pushed through it, the odds were very high it was going to spike higher on buying and/or short covering. It did. It made a high of $57.20 today before srttling at $56.92. The trade was long once it cleared and would have been an easy “free” dollar.
I had mentioned that CHk was likely to try and hold $48.60, it made a low of $48.90 a few days ago. Oil prices have obviously caused virtually all energy stocks to take off. CHK would have almost certainly have traded sideways for an extended period if that had not happened, as I mentioned. News and outside developments can and will “blow up” what should or is likely to happen.
Doubt Firm Numbers? Look At CHK Today And The SB Number of $55.00
May 5, 2008 10:58 PM
Some, if not most, doubt that numbers control the markets. One glance at CHK today should prove otherwise. I said “it has to clear $55.00 to be long in that area” on CHK. It backed off $55.00 all day after making a high of $54.97 today. What people do not understand is $54.95 and 55.05 is NOT the same as $55.00. This is the nonsense about “value” and PE and other things people worry about that has almost no relevance in the market. $54.97 is “cheaper” than $55.00. Does it matter? No. It has to clear $55.00. Period. Until you understand that and how the market really works, you cannot be succesful, IMO. If we had cleared $55.00 today, the trade would be long. If we clear it tomorrow, it depends as it could reverse again. But clearing it today, with a low of $53.10, the chance of a reversal would have been slim, if any and the trade would have been push higher. Get it yet? People will short under that number as the risk/reward ratio is extremely favorable. Risk is a nickel, potential reward is HUGE.
If we had cleared $55.00 today what would have happened? Shorts would have covered and the stock would have spiked higher. Does that make any sense at all on a “value” basis? No. Does it matter? No. That is how the market works.
CHK Update: Mixed Bag Up Here, Range Bound Is Likely
May 2, 2008 10:10 PM
I said CHK was likely going to try and hold $48.60 on any checkdowns. Thursdays low was $48.90. So the push higher makes sense, along with the spike in energy. I would not be long here however as $55 is a big hurdle to be long in this range. It is an avoid on both sides, IMO.
Unless we get something major to move energy prices, i fully expect CHK to trade in a range for a time. If you recall, i said long CHK way back when near $44 BUT predicted it would trade sideways for an extended period…and it did for about 2 weeks. I expect a similar pattern here…and there is no reason to be either long or short the stock here.
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