Two stocks I added last week were Southwestern Energy (SWN) and Chesapeake Energy (CHK).  Now what do I mean by a free trade?  In my most simplest way to describe it, as long as the stock doesn’t go bankrupt then your exit price stays above your entry price because the retracement level is greater than your entry price.  Basically you can almost set it and forget it.  Let’s look at SWN and CHK to see what I am talking about:

Southwestern Energy (SWN)

Here you can see where SWN currently is and where my exit is at ($15.70).  If price goes lower then my exit will come down because it will be just under the top of the gray box which is the 50% Fibonacci retracement level which I have measured from the top of the point that has the white circle.  Now let’s look at the chart if price does go all the way to $0.01:

As you can see here if price does go down to $0.01 then my exit would go to just below the 50% Fib retracement level which would be around $14.40.  My entry was around $3.60 so as you can see that as long as SWN doesn’t go bankrupt then when the retracement does happen I stand to make a very nice return.  Usually I like stocks with a dividend while I wait but unfortunately this stock doesn’t have one.  Hopefully natural gas prices will rise again soon to boost this at CHK that we will look at now.

Chesapeake Energy

Here you can see the current exit level at $11.10 which is just below the 50% Fib retracement level drawn from the peak that is under the uppermost white dot.  I got in around $2.75.  Now lets look at what price would look like if it went down to $0.01:

Well the closest I could get it was to $0.03 for the lowest price but that is close enough.  Even if price gets down to that level then as you can see from the chart my exit is around $10.20.  Once price hits the 50% Fib retracement level then those trades are close and I am looking for a new one.

tl;dr

Southwestern Energy (SWN) and Chesapeake Energy (CHK) are what I call “free trades” where the entry price remains lower than the exit point at any point of the price of the stock.  The only negative is that neither stock currently offers a dividend because these plays can take awhile to play out but in my opinion these are excellent long term buys which I currently own.