4 Trade Ideas for BP: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

BP, $BP, started higher in December and after a couple of stair steps, peaked in early April. The stock price pulled back from there, quickly retracing 38.2% of the rise and then transformed into a broad consolidation. It oscillated around the 38.2% level for 2 months and then dropped again in 2 legs. The second leg, with big gaps between the candlesticks and on large relative volume is the definition of capitulation. And it closed the gap from January.

Friday saw the first buying. As it starts back higher the RSI is also turning up out of oversold with the MACD slowing its drop. The Bollinger Bands® are very wide so this might not bounce right away. There is support at 38.80 and 38 then 37.50 and 36.60. Resistance above is at 39.80 and 40.80 then 41.50 and 41.90 before 42.65. Short interest is low under 1%. The stock pays a dividend measured at an annual yield of 6.27% as of Friday and the company is expected to report earnings next on July 30th.

The August 2 Expiry options chain shows the biggest open interest at the 42 and 43 strikes on the call side. The monthly August options are biggest on the call side as well, at 40 then 42 and 43. September options are biggest at the 41 put strike then the 42 call. Finally the October chain has biggest open interest at the 42 call, but size from 40 to 47 and then 35 to 39 on the put side.

BP, Ticker: $BP

Trade Idea 1: Buy the stock now (over 39) with a stop at 38.50.

Trade Idea 2: Buy the stock now (over 39) and add an August 2 Expiry 39/38 Put Spread (33 cents) while selling the October 42 Call (28 cents).

Trade Idea 3: Buy the September 40 Call for 63 cents.

Trade Idea 4: Buy the September 37/40 bull Risk Reversal for 10 cents.

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After reviewing over 1,000 charts, I have found some good setups for the week.  These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which saw the last week of Fed Speak and Options Expiration take a toll on equity markets as they suffered a down week.

Elsewhere look for Gold to pause in its uptrend while Crude Oil drives lower. The US Dollar Index remains stuck in a sideways consolidation while US Treasuries are pausing in their uptrend. The Shanghai Composite and Emerging Markets look to be consolidating sideways, the Shanghai Composite after a pullback and Emerging Markets in an uptrend.

Volatility looks to low but drifting up keeping the bias slightly lower for the equity index ETF’s SPY, IWM and QQQ. Their charts all show consolidative pullbacks in the shorter time frame, with the SPY and QQQ showing no real damage, while the IWM continues to tread water. The SPY and QQQ look strong on the longer timeframe with the IWM continuing to sideways on this timeframe also. Use this information as you prepare for the coming week and trad’em well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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