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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.

Written by Tom@StockBlade.com · Filed Under CHK 

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