Tags: Chesapeake Energy | stock | share price | invest

Erotic Novel Writer Pumps Up Chesapeake Energy

Image: Erotic Novel Writer Pumps Up Chesapeake Energy

By    |   Wednesday, 24 Feb 2016 05:33 AM


Before the 1929 stock market crash, stock market speculator Joe Kennedy famously said he knew it was time to get out of the market when shoe shine boys were giving him stock tips.

Kennedy would probably be amazed and bearish to see authors of erotic novels creating nearly $200 million in market value for the worst-performing stock in the S&P 500.

On Monday, shares of Chesapeake Energy (CHK) jumped on news there was speculation of a takeover. A search found the speculation wasn’t from a Wall Street analyst. The speculation came from a blog written by a gentleman who ran a mortgage company in the 1990s and has been a real estate broker in California while writing an erotic novel. For some reason, his musing went viral and CHK jumped even though the blog post provided no reasons other than a headline to believe a takeover was possible.

The author’s reasons to be bullish included obviously inexperienced opinions such as “I have been trading over 20 years and have never seen a stock halted 5 times in one day.” A simple search of halted stocks shows another issue, PrimeEnergy, was halted 13 times that same day. As a trading professional knows, multiple trading halts are common on volatile days.

The rest of the post included other statements an experienced trader would realize were worthless.

It’s possible CHK was simply oversold and experienced a dead cat bounce before resuming its downtrend. Wall Street analysts who are familiar with the company’s capital structure question CHK’s ability to meet its debt obligations over the next few years. 

However, given CHK’s unsupportable debt, it’s not really surprising to see a real estate agent become bullish. After all, real estate agents were bullish on home prices when debt-laden consumers were struggling to make their payments. CHK is most likely another subprime borrower hoping to be bailed out by a deep-pocketed optimist.

What is surprising is that investors are acting on headlines instead of digging into research to find good stocks. It’s probably time to become bearish when erotic novelists are giving stock tips.

Michael Carr, CMT, is a subadviser to a mutual fund family and a chartered market technician. To read more Michael Carr, CLICK HERE NOW.

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MichaelCarr
What is surprising is that investors are acting on headlines instead of digging into research to find good stocks. It’s probably time to become bearish when erotic novelists are giving stock tips.
Chesapeake Energy, stock, share price, invest
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2016-33-24
Wednesday, 24 Feb 2016 05:33 AM
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