Chesapeake Energy Corporation (CHK) is displaying a stronger bearish signal this time around.

My previous recommendation for shorting CHK did not work out and the stock went up three and a half points. The moving averages convergence divergences (MACD) is showing clear changes of the trend to bearish mode for this stock and it is not too late to get in on the down trend of this energy company.

Options pricing for this stock seems very reasonable because it is not a highly volatile stock. Time value for a January $40 strike put costs only $0.70 while the rest are intrinsic value:

$3.50 (price of option) - $2.80 (in the money/intrinsic value) = $0.70 (time value)

Furthermore, there are a total of 71,068 open interest of put and call option contracts combined for strike $35 expiring January 2008. Thus, it is highly beneficial for the options writer to push the stock price there and let it expire worthless by expiration.

As usual, price action trading rules apply. By all means, stay away from this trade If you do not know what it means.