Will Chesapeake Energy recover?

Published on Tuesday, 24 July 2012 06:32 Written by TradersHuddle Wire

New York, July 24th (TradersHuddle.com) - Shares of Chesapeake Energy Corporation (NYSE:CHK) closed the trading session at $17.44 below calculated support at $18.30. The stock broke down technically, raising concerns as the move might trigger additional selling.

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 stock was trading in a well defined range with support at $18.30 and resistance at $19.39; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $18.30 will remain in focus as Chesapeake's price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in Chesapeake Energy can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $18.30. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.