BP plc (ADR)’s (BP) Stock Bounce Faces Challenges

The weekly stochastic readings are closing in fast on overbought levels, but the 10-week RSI has a little way to go before it gets there.

What is interesting about BP’s stock rally since the end of September is that it and other oil and gas exploration companies have rallied over 15% on average. Over the same time period, oil itself has gained 0.11%, meaning there is a disconnect between the performance of the commodity and the stocks in the sector.

The sentiment toward BP is mixed, as short sellers have completely shied away from the stock. The short interest ratio is 0.72 and analysts are pretty bearish toward the stock, with only three “buy” ratings to go with and eight “hold” ratings and one “sell” rating.

Given the layers of resistance on both the daily and weekly charts, I don’t like the idea of being long BP at this time. I would definitely be looking to short the stock between the present level and the $38 level, with a target goal below $30 a share.

In terms of a stop-loss, you could use any number of points – a weekly close above the upper rail of the channel, a weekly close above the 52-week moving average or a close above the 200-day moving average.

This article is brought to you courtesy of Rick Pendergraft from Wyatt Research.

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