Chesapeake Energy Stock Higher On Asset Sale Talks

Short sellers have been flocking to CHK in recent weeks

Patrick Martin
Mar 9, 2018 at 9:47 AM
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Chesapeake Energy Corporation (NYSE:CHK) is up 2.4% to trade at $3.05 this morning, after The Wall Street Journal reported the energy giant has engaged in asset sale talks with Tellurian (TELL). Chesapeake is reportedly seeking to cut $2-3 billion in debt through asset sales, and discussions apparently revolved around the company's Louisiana drilling fields. 

Chesapeake Energy stock has shed 25% year-to-date, but is currently on track for a weekly win. The equity carved out a path of lower lows since April that culminated in a two-year low of $2.54 on Feb. 9. Today's pop has the shares testing their 30-day moving average, a trendline that has served as resistance since late January. 

The stock's recent technical struggles has created plenty of skepticism. Of the 16 brokerages covering CHK, 15 rate it a "hold" or worse. Furthermore, short interest shot up by nearly 19% during the last two reporting periods to 179.37 million shares, the highest point since early October. This represents roughly 20% of the stock's total available float, and more than four days of pent-up buying demand, at CHK's average daily trading volume.

Options traders, however, have been displaying bullish tendencies. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) confirms a substantial call bias, with long calls more than tripling puts in the past 10 days. Of course, some of this activity could be short sellers using calls to hedge against unexpected upside -- like today.


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