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February 2, 2010

BP

Well, I though I was gonna lay low on the blogging for the rest of the week, but I suppose I'm just too addicted to this stuff. A family member expressed concern today about his BP shares, which are down over 10% from a recent high. The stock got clocked for 3% just today, despite a big rise in oil. The controlling factor was presumably an earnings report which came in below expectations. As regulars know, I believe that 99% of the time news does not define price action but rather the market uses news as an excuse to do what it already wanted to do. In any case, I pulled up a chart of BP and got a sudden case of bullishness for the shares.

BP stock chart

The huge volume surge reeks of panic selling, and price bounced right off a consolidation line. I'd give fairly high odds that the decline in BP shares has run its course and that the stock will begin participating in the surge in oil price which should accompany our precious metals rally. Based on the height of the consolidation, a target of $70 implied... about 27% higher than today's close. For the record, I am taking no position in BP, but offer it for those who like such technical trades. My money is parked where I expect the highest returns: in precious metals and PM mining shares.

 

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