Chesapeake Energy Corp. (NYSE: CHK, Stock Forum) has embarked on a quest for new multi-year highs this week, after last night announcing a deal with CNOOC Ltd. (NYSE: CEO, Stock Forum). More specifically, the China-based firm said it will buy into several of Chesapeake’s shale and oil gas leases in the U.S. for $570 million in cash, prompting no fewer than two price-target boosts for CHK yesterday.
From a broader sentiment standpoint, though, there’s still plenty of room on CHK’s bullish bandwagon. According to Zacks, less than half of the 38 analysts following the stock consider it worthy of a “buy” or better endorsement. Plus, Thomson Reuters deems the consensus 12-month price target on the security at only $30.27, representing a discount to the equity’s new two-year peak of $30.63.
In the same vein, more than 36 million CHK shares remain dedicated to short interest, accounting for 5.7% of the stock’s total available float. In fact, at the shares’ average daily trading volume, it would take more than three sessions for all of these pessimistic positions to unwind.
Meanwhile, CHK sports a 10-day put/call volume ratio of 1.8 on the International Securities Exchange (ISE), indicating that traders have bought to open almost twice as many CHK puts as calls during the past couple of weeks. What’s more, this ratio stands just one percentage point shy of an annual acme, suggesting that speculators on the ISE have scooped up bearish bets over bullish at a faster clip just 1% of the time during the past year.
Technically speaking, the shares of CHK have advanced more than 14% since the start of 2011, guided higher atop their 10-day and 20-day moving averages. In fact, the security has outperformed the broader S&P 500 Index (SPX) by almost 27% during the past 40 sessions, and is now poised to finish the week north of round-number resistance at the $30 level for the first time since October 2008.
Should the shares of CHK continue to flex muscle both on and off the charts, the pessimism plaguing the stock could actually work to its advantage, from a contrarian perspective. Another dose of bullish brokerage notes, a significant short-squeeze situation, or an unwinding of skepticism in the options arena could all act as catalysts even higher for the outperforming commodities concern.
Disclaimer: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column