The recent progress in the stock of Chesapeake Energy Corporation (NYSE:CHK) has alerted everyone to look out for right opportunity to invest. Many analysts use price trends and patterns to predict future performance, and we can glean some important insights about CHK by examining the chart.How has the stock performed recently?
Chesapeake Energy Corporation (NYSE:CHK) has been trading in a bearish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of CHK has increased +4.44%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 2845%. After the latest session, which saw the stock close at a price of $4.00, CHK sits below its 52-week high.Momentum indicators
Of course, these surface-level price movements don’t tell us much about the direction that CHK may be headed in the future. If we want to get a sense of CHK’s future performance, we have to look at the speed and size of these price movements. Using what are known as momentum indicators, we can use the stock’s price momentum to get a sense of whether the stock is in the midst of, or nearing the end of, a current trend. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for CHK is 52.50%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 75.62%, tells a different story, and suggests that CHK currently trades in overbought territory.What do the trading volumes reveal?
Price isn’t the only tool analysts use to forecast future performance. Volume patterns can also reveal some important insights. If, for instance, a stock’s volumes suddenly increase by a significant amount, it’s usually a sign that the level of conviction behind the trade is high. Investors may feel very strongly about the future direction of the stock in question. Chesapeake Energy Corporation (CHK) average trading volume of 27,676,244 during the past month is 15.39% below its average volume over the past year, indicating that investors have been less active than usual in the stock in recent times.
CHK is currently undervalued by -8.88% relative to the average 1-year price target of $4.39 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 3.10, which implies that analysts are generally neutral in their outlook for CHK over the next year.How risky is the stock?
In order to put CHK’s recent price performance into context, we need to get a sense of how the stock moves in relation to the overall market. Beta, which measures a stock’s price volatility relative to the market, provides the cleanest measure of systematic risk for a stock.
Chesapeake Energy Corporation (NYSE:CHK) has a beta of 2.04, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. CHK therefore has an above average level of market risk. During the past couple of weeks, CHK average daily volatility was 37.97%, which is 10.85 percentage points lower than the average volatility over the past 100 days.