'Buy' Signal Just Flashed for Chesapeake Energy, H&R Block

Chesapeake Energy Corporation (NYSE:CHK) and H & R Block Inc (NYSE:HRB) broke below their lower Bollinger Bands, which has been a solid buy signal for stocks

Feb 8, 2017 at 10:27 AM
facebook X logo linkedin


The best "buy" signal since 2016 has been the Bollinger Band breach, as Schaeffer's Senior Quantitative Analyst Rocky White noted in a recent comparison of eight trading indicators. In the past year, stocks that broke below their lower Bollinger Band went on to average a one-month return of 2.91%, and were positive about two-thirds of the time. We asked Schaeffer's Senior Equity Analyst Joe Bell, CMT, to weigh in on a couple of stocks that recently broke below their lower Bollinger Band, and that look most attractive from a sentiment and price perspective. He singled out the shares of natural gas concern Chesapeake Energy Corporation (NYSE:CHK) and tax issue H & R Block Inc (NYSE:HRB).

Analysts Have Yet to Acknowledge CHK's Massive YoY Gains

Bell notes that CHK has been in a "solid uptrend since forming a bottom" one year ago, and is "pulling back to an ascending trendline connecting the higher lows since this bottom." What's more, CHK's 200-day moving average is just below the shares. Despite the stock's year-over-year gain of more than 210%, only four out of 21 analysts offer up "buy" recommendations -- leaving the door wide open for upgrades to lure more buyers to the table. Plus, 14.2% of CHK's float is sold short, suggesting there's plenty of potential buying power still sitting on the sidelines. (And seasonality doesn't hurt, either.)

 

CHK stock chart bollinger bands

HRB Testing the Bottom of Its Recent Range

"HRB has been in a trading range since the end of August 2016," Bell notes. The stock is "right near the bottom of this range, at $21, and the $24 area has been the top of the range" -- leaving room for about 11% upside from current levels. Plus, the stock's 14-day Relative Strength Index (RSI) just crossed back above the oversold 30 level -- another positive sign. As with CHK, HRB remains plagued by pessimism. The stock is "highly shorted, as it would take nine days to buy back these bearish bets," at HRB's average pace of trading. Although options volume is light on an absolute basis, buyers have picked up HRB puts over calls at a faster-than-usual clip during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Plus, seven out of nine analysts rate HRB a "hold" or worse. A rebound off familiar support could spark a fresh bearish exodus for H&R Block.

HRB stock chart bollinger bands


Don't miss Schaeffer's free weekly stock market forecast. Sign up now for Monday Morning Outlook.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI