In the wake of a disappointing earnings report last week, the shares of Chesapeake Energy Corporation (NYSE: CHK, Stock Forum) – unsurprisingly – explored the red. In fact, even with the broad-market plunge during the past week, the security has lagged its peers, underperforming the S&P 500 Index (SPX) by 14% during the past 60 sessions.
However, trending lower is nothing new for the security; since the start of 2010, the stock has surrendered more than 10%, marking a string of lower highs and lows. Plus, in recent weeks the equity has succumbed to pressure from its descending 10-week moving average, which has contained CHK's rebound attempts since early March.
Furthermore, while the stock received a boost following the firm’s recent pledge to raise up to $5 billion in capital over the next couple of years, the equity’s rally has yet to lift it above this descending trendline.
What's more, from a sentiment standpoint, the equity's downward trajectory could accelerate if bullish analysts abandon ship. According to Zacks, CHK currently harbors 12 "strong buys" and three "buy" ratings, compared to 10 lukewarm "holds" and nary a "sell" to be found.
In addition, the consensus 12-month price target among the brokerage bunch stands at a lofty $34.48, Thomson Reuters reports, representing a steep premium of more than 45% to CHK's closing price of $23.10 on Monday, May 10.
In conclusion, the stock's fundamental and technical troubles, juxtaposed with a batch of bullishly-biased brokerage firms, present a potential contrarian bearish opportunity. Should the optimistic analysts hit the exits in the wake of CHK's unimpressive performance on the charts of late, a wave of downgrades and/or price-target cuts could spark added selling pressure on the already beleaguered security.
Disclosure: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column.