BP oil spill has drifted the stock’s price from $80 to $27 the last 2 years. Important support levels gave way on the weekly stock chart and Fibonacci retracements pointed out key reversal points. Applying technical analysis at the BP stock charts could lead to profitable trading by short selling the stock, while buying the stock even today is risky. As the British oil company tried to take control of the oil disaster, the negative news affected the stock’s price in a dramatic way, most notable during May 2010. Yet again, thestreet.com discusses about an uptrend above $60 for the BP stock.
Looking at the BP weekly stock chart, BP shares were trading between $60 and $80 during 2006/07. BP stock’s price was trending sideways until the oil spill pushed prices down to $34 in the beginning of 2009. Drawing Fibonacci retracement levels starting from the $80 high to $34 low, we see that the stock price retraced up to the 61.8% Fib level in late 2009 before resuming the downtrend. At that time there were a couple of very interesting candlestick formations along with the retracement. Technical analysis shows that a Head and Shoulders pattern at $60 was formed (thin blue lines) that also converged with the strong support level of 2006/07 period. Short selling the BP stock at that entry points was proven great trading opportunity as the BP price declined rapidly losing more than 50% in two months’ time.
The downtrend finally found support at $27 this year and is pulling back the last 6 months. Nowadays the shares are trading close to the 50% Fibonacci retracement level, which aligns with the 23.60% level of the previous retracement and a support level during the 2009 uptrend (thick blue line). Other notable characteristic of the BP stock’s downtrend is the volume increase during this year’s decline due to Deepwater Horizon oil rig explosion.