Has Chesapeake Energy (CHK) reached a bottom? A bottom is a process. It is that point in a downtrend when prices finally stabilize. Investor buying is strong enough to offset trader liquidation. Sentiment and news is probably negative, but farsighted investors have begun to accumulate shares as they anticipate they will be trading higher in the months ahead.
In this chart of CHK, above, we can see that the trend is still down with CHK below its declining (negative slope) 50-day and 200-day averages. The Slow Stochastic and the Relative Strength Index (RSI) in the bottom two panels are at low levels, meaning they are oversold (i.e. have gone down too fast), but they have yet to turn up. A security can always get more oversold. Volume has been heavy the past five weeks and gives us a hint that some longs have thrown in the towel.
This second chart of CHK, above, shows the steep and persistent decline. The Slow Stochastic is very oversold and the 14-week RSI is also oversold. The On-Balance-Volume (OBV) line on this time frame might be holding its prior low -- we'll see. Certainly CHK has something to reverse and sentiment is bearish -- we just need prices to get the message.
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The shares of the developer of liquefied natural gas projects could rally again but do involve risk.
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