CLR CEO invest in his company $155 million

Mikrg Updated   
Just in 10 days, CLR became a much more attractive company with its' CEO, billionaire Harold Hamm, buying stocks worth $155 million. Let's take a look at whether we should follow him.

Before I continue, please note that I do not hold CLR and only consider buying. As always, please note that this analysis is my point of view, and trading is a risky activity. You are the only responsible for your trading actions. Now, with disclaimers being said, let's take a look at the trade.

There are several interesting points to analyze.
  • First of all, CLR is an oil company based in the US. Unlike other oil companies, it didn't hedge the oil price risk. As a result, because of the COVID-19 crisis, it had to shut many of its' wells. At the same time, the company gains from the oil price increase much more than other market participants. In fact, taking a position in CLR is partially like taking a lagged position in the oil itself because of the lag between oil price and stock price increases.
  • Second, from June 22 till July 7, CEO, billionaire Harold Hamm, bought additional $155 million stocks, bringing his overall company control to 78%. For those who don't know, Hamm is an old legend in the oil market. He is a self-made billionaire and was one of the first to start horizontal (shale) drilling. In this sense, I believe he had reasons for his decision.
  • Third, the stock price right now is attractive. It had two negative days, falling to an upward trendline and a 50-period MA. This level is supported by the COVID-19 gap and excessive activity area below.

Overall, the price seems to be interesting, and the trade offers a great risk-reward ratio. The first target is about $27.5, and the second one is about $36. At the same time, a narrow stop below $13 might be a good idea, in case the levels don't work and we have to search for another entry point.

There are two ways to play around the idea - you can either wait for a bullish candle to appear or to entry right at the spot. The first option offers a lower risk-return ratio but increases the probability of success. The second one is just the opposite. Since risk-return in option one is still really good, I'd recommend it instead of option 2.
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