Today CHK (Chesapeake Energy) had a great breakout trade unfold that generated great profits if anticipated and traded properly. Looking at the daily chart we can see how the trade scenario is developed. Over the past two to three weeks we can see a clear resistance level around 21.80 for the stock. Ever time the stock approached this level seller came into the market and pushed the stock lower (creating a reference point a trader could expect volatility once the level was broken.)
What makes this trade so attractive (and a must take) is the profit potential compared to the risk taken on the trade (the trader has a solid reference point to determine if the trade is working out, which is the 21.80 area). As we see on the charts below once we broke and held above the 21.80 the closest resistance area was the 21.50-21.60 range (giving the trader a reasonable profit target to aim for if the stock generated some volatility.)
The most important thing here is not the follow through on the trade but the concept of how this trade idea is developed and the reasons why you would want to take a trade like this very time it unfolds.
