A follow up on our trade on Chesapeake Energy (CHK) and National Oilwell Varco (NOV) (August 16, 2016)
CHK NOV CHK
In yesterday’s Free Chart video I looked at National-Oilwell ( NYSE:NOV ), and I looked at Chesapeake ( NYSE:CHK ), noting how they are both starting to move up. So we got a little move higher in NOV ( NYSE:NOV ), nothing to write home about, unless you’ve got nothing to write home about then go ahead and do that here. The pullback to the 50-day moving average has held, and that’s great.
Chesapeake ( NYSE:CHK ), which was the better trade, nice sideways to down consolidation and then a breakout on heavy volume. You just feel like this is going to continue higher, and so it has today. So what do you do? You stay long. That’s really the point here, you stay long. We got even more volume today. Wherever you bought, assuming you bought today, maybe in the morning, if you bought on this video, if you bought on another reason use that reasoning. But, if you’re in now I would say, you put a stop below today’s intraday low, it’s 5.42, so you’ve basically got an 8 percent stop, something like that.
So if you do that, an 8 percent stop on this, then you continue to take advantage of a volatility pop here, a quarter of the float is short; you’re probably going to get more upside and you have defined your downside. I can’t really say you’ve minimized it, you just know what it is. So you’re putting yourself in a position to make money if the stock continues to go up. On the other hand, if the stock rolls over you know you’re out early because you’re looking at this and the only way you’re going to get stopped out down here is if this breakout was a ‘f’akeout’. That’s what I would do on Chesapeake ( NYSE:CHK ).
Free Chart