Swell Building Up in Energy / BUY Chesapeake [CHK] for Squeeze

Currently I’m searching for an entry point on a medium term trade in energy [XLE].  The trend is UP, so let’s ride along.

The following are the top energy stocks versus the bottom energy stocks trading on the spider in a 3-month.  Try to view the sector as a continuous flow of water, with the entire sector rising.  You’ll get a nice “bell-curve” if you plot this on a chart.

 

3m-xle-spdr-losers3m-xle-spdr

A closer look though reveals that over a shorter period we see spikes in some of the underperforming stocks, especially CHK

chk-xle

CHK trades within a 5-8 channel after breaking its $4 floor.  Naturally profits were taken in May after a major run, but trying to observe the trader’s psychology, I feel there’s a little sense of anxiety for traders to hold the stock long which is usually a good sign to buy the dips.  Furthermore, the shorting on this stock is quite high which I assume is the cause for the stock to rise from $5 to its peak at $8  from Aug-Sep.  Next squeeze is building up.

chk-squeeze

Looking to get in long between the 5.50 – 5:70 range or cheaper.

 

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