I caught Cramer's rant on CHK today, and the eye-brow raiser was when he did his quick valuation on CHK. Basically, his valuation indicated the stock should double, even triple. Since I am a fan of CHK, I wanted to look into this further, and see if the charts were indicating such a move.
The charts aren't saying much. The weekly clearly shows the aura of a breached bubble, and the bearishness of oversupply of a commodity.
Thirty looks to be a big barrier via the 200 SMA. But to get to 30, the Daily needs to show more conviction.
I am a fan of CHK, and indicated to get in if 20 was breached downward back in August (before it touched the 19s). Since then it has had a great move.
I fundamentally agree with Cramer, CHK is undervalued. But a few things he left out that worries the street, and causes a discount are: 1. trading and 2. a threat to their shale drilling.
The concerns are overblown, but causes uncertainty none-the-less. The massive hedges seem to be the right thing to do, but investors will get better clarity on it as winter approaches. As winter prices set in, and Nat. Gas does not breach 4.5 or 6, then I think this uncertainty starts to get mitigated.
The concerns highlighted via their shale drilling are real, and the cost of extraction will increase with needed increase in oversight and regulation. However, its a issue that can be resolved a few years out as Nat. Gas increases in value.