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If you want to buy Chesapeake Energy (CHK), read this first

  • CHK ticker has grown by nearly 30% Thursday on beliefs that the company will survive.
  • Even though the company has jumped today there are still some concerns.
    • Chesapeake Energy is expected to see negative earnings for the second year in a row.
    • The company only has a market cap of $256 million which could be dangerous with such a small market cap.
    • Chesapeake owes a great deal of money and planned to rely on asset sales to finance most of its debt this year. Given extremely low oil prices, those asset sales may not be viable.
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Investors who have bought the stock last week are given a reward today as shorts are kicking themselves, but do not get so comfortable. With reasons such as the ones listed above, you cannot approach CHK as an investment. You have to deal with these kinds of stocks as if it were a gamble. Odds of the Chesapeake Energy company surviving are slim, any investor putting money on this ticker may want to do so with caution as it could be a ticking time bomb waiting to blow.

We see these kinds of gains pretty regularly now. Especially in the biotech sector, pumping a company’s stock based on hope. Shortly after it is usually followed by big losses and bagholders with high averages. The moral of the story is to be safe trading small-cap companies as it is a very easy game to lose.

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About Chesapeake Energy

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Chesapeake Energy Corp. is an independent exploration and production company, which engages in acquisition, exploration and development of properties for the production of oil, natural gas and natural gas liquids from underground reservoirs. … The company was founded by Aubrey K. McClendon and Tom L.

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