The stock price of Chesapeake Energy Corp. (CHK) has been depressed for a long time but the price action and indicators have improved significantly the past two months. Increased volume and a number of technical buy signals come after months of price weakness. Let's drill down in the charts to see if a bullish strategy makes sense now.
In this daily bar chart of CHK, below, we can see a downtrend from last July to February. Heavy volume in February and March may have signaled a reversal.
The daily On-Balance-Volume (OBV) line turns more positive in early May. Prices rally above the rising 50-day average line in early May and above the bottoming 200-day line by the middle of May.
This month the 50-day line turned up above the 200-day line for a bullish golden cross.
The trend-following Moving Average Convergence Divergence (MACD) oscillator was below the zero line the past year but it too turned bullish in May.
In this weekly bar chart of CHK, below, we can see that after a long decline the price of CHK is finally above the rising 40-week moving average line.
The weekly OBV line has turned up from late April and the weekly MACD oscillator is bullish.
In this Point and Figure chart of CHK, below, we can see that a rally to $5.50 is bullish and that a rally to $8.50, the price target, would be even more bullish as prices would be breaking above the late 2016/early 2017 highs.
Bottom line: Aggressive traders could go long CHK either on a dip to $5.00 or on a rally above $5.50. Risk a close below $4.50 looking for gains to $8.50 and perhaps higher.
