Where Chesapeake Energy Could Be by the End of March

Chesapeake’s implied volatility

On March 18, Chesapeake Energy’s (CHK) implied volatility was 51.9%, which is ~14.7% less than its 15-day average. On the same day, Range Resources (RRC) and Antero Resources (AR) had implied volatilities of 43.8% and 46.3%, respectively.

Where Chesapeake Energy Could Be by the End of March

Price forecast

On March 19–29, Chesapeake Energy should close between $2.89 and $3.41 68.0% of the time. The forecast is based on Chesapeake Energy’s implied volatility of 51.9% and assumes a normal distribution of prices. On March 18, Chesapeake Energy closed at $3.15.

Moving averages

Chesapeake Energy’s 200-day moving average of $3.76 will be the next important resistance level for the stock. The price level is close to the upper limit of our forecast. On March 18, Chesapeake Energy closed 10.1%, 15.1%, and 8.2% above its 20-day, 50-day, and 100-day moving averages, respectively.

On the same day, Chesapeake Energy’s 50-day moving average was 27.3% below its 200-day moving average. In technical terms, the crossover is called a “death cross.” Usually, a death cross is followed by more weakness. On March 18, natural gas’s 50-day moving average was 8.5% lower than its 200-day moving average. On the same day, US crude oil’s 50-day moving average was 12.7% lower than its 200-day moving average. In the last quarter, Chesapeake Energy operated with a production mix of ~74% in natural gas. By the end of 2019, Chesapeake Energy’s production mix in oil will be 26% based on the company’s guidance.