Raymond James Targets Major Upside for CHK Stock

CHK stock has rallied hard off its Christmas Eve low

Mar 19, 2019 at 10:56 AM
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Raymond James raised its price target on Chesapeake Energy Corporation (NYSE:CHK) stock to $4.50 from $4.00 -- a nearly 43% premium to last night's close -- and reiterated its "outperform" rating. The brokerage firm cited expectations the mining company will be cash neutral next year, as Chesapeake "looks to continue paring down debt."

In reaction, CHK stock is up 3.2% to trade at $3.25, extending a rally off its Dec. 24 low at $1.72. Since then, the shares have surged 89%, with pullbacks supported by a trendline connecting higher lows since that Christmas Eve bottom and, more recently, the security's 80-day moving average. However, this surge has run out of steam near $3.30, a region that coincides with the stock's Nov. 20 bear gap.

Amid this uptrend, call buying has been hot in CHK's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 6.37 ranks in the 74th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Given how heavily shorted Chesapeake Energy stock is, though, some of this call buying could be at the hands of shorts initiating an options hedge against any additional upside risk. The 204.35 million CHK shares currently sold short accounts for more than 23% of the equity's available float, or four times the average daily pace of trading.

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