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Natural Gas Correction Proves Profit Taking Always A Good Thing

23 July 2008 4 Comments

I have been criticized heavily for selling my position in Chesapeake Energy (CHK) as the stock climbed to new highs over the last few months. As I mentioned in previous posts, the move higher looked closer and closer to a parabolic climb. These climbs typically end up ugly. Well, it’s been ugly over the past few weeks.

Chesapeake peaked at approx $74 a share and is now under $50. It seemed that the stock would go up continuously and all Chesapeake supporters screamed how it’s ridiculous to sell this stock. The CEO himself said that it’s a hundred dollar stock. The funny thing is I believe most of this. I think the stock will go higher, maybe even hit $100.

However, when a stock is skyrocketing higher, revealing more and more profit opportunities, you have to take advantage of them. You must cash in your profits when you can, because you might not be able to down the road.

I love the company, and I bought more at $55 as it’s dropped more. If it continues, I’ll buy more. If it shoots up in a similar fashion, I’ll sell again. Ring the register when you can, most stocks that seem too good to be true will get hit with a correction at some point.

4 Comments »

  • Chris said:

    No criticism here, in fact I would have probably sold a little earlier and missed more of the top just because I get scared once it goes parabolic. I just think you started buying again too early, but long term you will be fine. If oil gets under $100 I will probably be a buyer of CHK

  • SBF said:

    Oil/gas alwasy makes a correction in the summer months. I don’t think we’ll see $100 or below this year (or next). Kevins got it right, buy a little now and watch for another chance to get in!

  • torbjorn said:

    it’s a pretty rowdy stock, one that’s good for swing trades. remember too, and I just learned this lately, that NAt Gas will basically follow oil prices, if not later – and at a more volatile rate. which makes it a sweet pickup when the time’s right.

    i see myself picking up some CHK after two up days…it’s becoming massively oversold, and is now fondling its 200 DMA, which in the past year has been its support point.

    great blog. I’m a recent follower and I like the fact that you’re going balls out and more or less public with your positions.

    one question with a simple answer, are you trading more than $2000 per position, roughly? cause that helps me (as a reader assessing my own goals) factor in if we have similar styles.

  • kevin duffey said:

    torbjorn:

    Thanks for the comment. I always trade in “chunks” of my position, where my total position in chesapeake may be somewhere in the 6-8k range, and I just picked up another 2-3k worth.

    Chesapeake along with Apple has been my largest positions. My next largest is PM.

    Keep making moves, right?!