BP (NYSE: BP) : Avoid Missing Out on the Energy Rebound

The first stock is integrated international oil giant BP (NYSE: BP). The former British Petroleum is still feeling the stain on its reputation from the 2010 Deepwater Horizon disaster in the Gulf of Mexico, and its stock price reflects it. In fact, it trades well below where it was before the accident.

But there is good news in that the technicals now point to a short-term rally. I am not suggesting BP will head back to pre-incident highs, but it is poised to make up some ground relative to its sector and the market as a whole.


For starters, the stock has pieced together a set of higher highs and higher lows since December. And that has caused the 50-day moving average to turn higher, along with a slight performance edge over the broader market during that time frame.

This week, BP challenged resistance from the February high at $42.10, closing above that level on Wednesday. In doing so, it scored an upside breakout from a visible, albeit unorthodox, inverted head-and-shoulders bottoming pattern. That target is the $49 area, which would put it above the 200-day moving average for the first time since July and offer a nice gain over the next few weeks.

Add in a fat 5.7% dividend yield, and even if the stock continues to lag, it remains a conservative way to participate in the energy rebound.

Recommended Trade Setup:

-- Buy BP at the market price
-- Set stop-loss at $39.50
-- Set initial price target at $49 for a potential 16% gain in eight weeks Please share this article