I just pulled up a chart of BP plc (ADR) and noticed that the stock is soon approaching an interesting supporting channel line. This is the same method I used to identify the bottom in USO a couple weeks ago. As it turns out I was one day early on the identification of the bottom in USO however in the weeks after that day USO had an outstanding rally.
If you plot the chart of BP right over the sp500 you will see that generally speaking BP does follow the general movement of the sp500. Obviously in recent weeks BP plc (ADR) has been a lot weaker than the sp500 index.
However, BP is very close to falling right down upon a declining channel line near the 23 to 24 range.
I am looking for the sp500 to hit a price low of 950 in the weeks ahead. I would like to maybe go long BP when and if the sp500 gets to 950 possibly by July 13, 2010, an important cycle date.
My thinking is that maybe by mid July with the sp500 at a panic low near 950 and the well in the Gulf maybe sealed up ahead of schedule could see BP get a bounce going that could make it sky rocket north for a few days.
This of course would only be a short term targeted trade and I would only consider it if and when BP gets to my targeted 23 to 24 range.
One could make an argument for going long BP right now based on several indicators which are obviously extremely oversold. However, given my confidence in the current broad market decline phase to 950, I would rather wait for the broad market to settle there and hopefully drag BP down into my 23 to 24 target range.
It will be interesting to see if BP can get to my target range and the nature of the reaction from that price range. BP has still not broken north from the recent 8 or 9 day declining down trend price line. Ideally, it would stay under this line for the next week or two to my target price range.