Here are two oil & gas stocks that are about to pay off. Check out these charts of National Oilwell Varco (NOV) and Chesapeake Energy (CHK) (August 15, 2016)
CHK NOV CHK
Chart of the Day, we’re looking at two of them today. Here’s why: Some of the oil and gas stocks they are almost starting to work, Chesapeake ( NYSE:CHK ) and National-Oilwell ( NYSE:NOV ) are two of them. The reason I say this is, this has been trading sideways for so long that it doesn’t have upside momentum. For crying out loud, look at the moving averages, 20, 50, 200, they’re all pretty close together. By definition that would be a stock that’s trading sideways, but we’re starting to get some play here. Above average volume on a really, really crappy day in the market, with super low volume. So this closed near the high of the day, up almost 10 percent, $5.50, so you can trade this like a millionaire. I think this stock works as long as it breaks out above this high of 5.60, so it’s like 10 cents. This stock starts to trade up here, coming out of a squeeze, right here, a pullback to test that breakout, and now we’re passing that test. So Chesapeake ( NYSE:CHK ) works.
The other one is National-Oilwell Varco ( NYSE:NOV ), a pretty similar chart pattern, same industry. A breakout here, it finally gets ABOVE this recent high here. So National-Oilwell ( NYSE:NOV ) works. The cool thing is, they don’t report earnings for a while. The same thing with Chesapeake ( NYSE:CHK ), they don’t report earnings for a while. So this is all good because all the recent buyers are now winners. Now, the deal here on Chesapeake ( NYSE:CHK ) is, and this is important, they are restructuring some of their debt. This company is really just weighed down with debt. So when you see the stock move like this and you look and say, “Well wait a minute, the didn’t report earnings. What’s the deal? How come this stock is moving?” The only real fundamental developments that you can count on moving a stock are 4 times a year, and that’s when they report earnings.
You’re always going to get folks that are buying and selling because there is new information there. Everything else is just kind of like when the company announces something, if there is some negative or positive article written about it, great. Upgrade, downgrade, coverage initiation, all of this stuff can move a stock but you can’t really count on it happening at a certain time. So HERE we get an announcement by the company that they’re restructuring their debt. The first thing that we are thinking of is not, “Oh my gosh! I’ve got to buy that stock.” The first thing that you’re thinking of is, what is everybody else thinking? I want to know what the crowd is doing. You can see here, right from the get go, the crowd was buying.
Okay, so now it’s a day later. Fine you missed this 9.5 percent move but we’re just coming out of a volatility squeeze so there’s probably more upside. What you have is a fundamental catalyst, debt restructuring, that brings out buyers. Boom! Those buyers are going to bring out more buyers that should ultimately drive this stock higher. So that’s really how you marry a fundamental news development with the price action in a stock. It’s not the news that we’re interested in. It’s the crowd’s reaction to the news that we’re interested in, that’s what can make us money. I hope that helps you with Chesapeake ( NYSE:CHK ) and National-Oilwell Varco ( NYSE:NOV ).
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