Monday, February 2, 2015

CHK Ascending Triangle Ready to Breakout

Click on Chart to Enlarge

Since I have made some recent posts mentioning CHK and suggesting it may be set for a nice move up if oil continues to rally, I am going to make another follow up here on it.

Currently there are a couple interesting points of note on the chart.  The first is the double bottom between October and December.  And now the action since then has formed an objectively ascending triangle with a horizontal resistance line at 20.35ish and an up sloping support line from the December and January lows.  Price has moved right back up to the resistance line today.  This price level will be the potential breakout of the pattern.  Additionally, one of my posts on CHK mentioned the short interest pattern in the stock and highlighted that December 23rd high as a probable short covering trigger point if price moves higher.

A short covering rally tends to be very directional and so it can be a nice move to participate in.  There are 3 points on the chart that I would suggest as partial profit taking areas or potential price targets.

The first is the unfilled gap down at 23.04.

Then the other two are at essentially the same level at roughly 25.25.

  • The first is the projection up from the symmetrical triangle taking the widest leg of the triangle and projecting it up from the resistance/breakout point.  
  • The second projection is the green line on the chart showing an equal price move to the Oct-Nov advance projected up from the Jan low.  Since this stock has the potential from a pattern standpoint to be right in the middle of a strong new uptrend, I think that it is likely to make a larger move from here than any rally in the downtrend.  
Again, I have April 18 strike calls here personally, but a close above the 20.38 level, would be reasonable cause in my opinion to expect that stock to quickly move up to 23.00 or higher.


No comments:

Post a Comment