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CHK: A Lesson In Sentiment

August 9, 2008 8:46 AM

perplexed.jpgI 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.

Written by Tom@StockBlade.com · Filed Under CHK 

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