Wednesday, September 26, 2012

Make a Potential 30% or 100% on This Drilling Stock... Your Choice


Natural gas and oil driller Chesapeake Energy (NYSE: CHK) is setting up for a move higher. The stock has formed a base at $14, and a series of higher lows on a climb to the year-long technical pivot at $20 sets up a potential breakout run. The wedge pattern seen on the chart below gives us a target of $26, which is the 2012 high made in March.
CHK Chart
A move to $26 would give shareholders a 30% return, but there is a way you could double your money with a stock substitution strategy. Continued low volatility makes a call option purchase attractive for long-term positioning.
One major advantage of using long options rather than buying shares is putting up much less money to control 100 shares -- that's the power of leverage. But with all of the potential strike and expiration combinations, choosing an option can be a daunting task. (more)

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