Bulls and Bears on the Trenches - Chesapeake Energy

Published on Tuesday, 24 August 2010 18:03 Written by TradersHuddle Staff

New York, August 24th (TradersHuddle.com) - Shares of Chesapeake Energy Corporation (NYSE:CHK) closed the trading day lower by $0.35 or -1.7% from its previous close. Chesapeake's shares price action formed what is considered to be a doji close, where the open and close prices are very close to each other, mainly signaling an indecision between buyers and sellers.

Chesapeake Energy Corporation (NYSE:CHK) produces oil and natural gas. The Company's operations are focused on discovering, developing and acquiring conventional and unconventional natural gas reserves onshore in the United States.

Chesapeake's current stock range is defined by a trough, which marks calculated support at $20.69 and by a peak that marked the resistance point at $22.60. These levels are closely watched by traders managing their positions.

Traders wanting to establish a position in Chesapeake Energy or traders that are already holding the stock can use the doji close to their advantage, since the pattern present a short term pause in the stock's price action. This pause results in an entry point for traders depending of which way the stock resolves this short term indecision.

Doji are important candlesticks that provide information on their own and as components in a number of important patterns. Doji form when a security's open and close are virtually equal. The length of the upper and lower shadows can vary and the resulting candlestick looks like a cross, inverted cross or plus sign. Alone, doji are neutral patterns.

Any bullish or bearish bias is based on preceding price action and future confirmation. In the case of Chesapeake Energy, given that the stock finished the session lower, bears should monitor the stock, as it could reverse if it manages to trade above today's intraday high. Below a Doji illustration: