Trading Idea - BP Broke Support, What to Expect?

Published on Thursday, 19 August 2010 05:28 Written by Christopher Lynn

New York, August 19th (TradersHuddle.com) - Shares of BP plc (NYSE:BP) closed the trading session at $37.30 below calculated support at $37.49 breaking the stock technically, raising concerns by investors, as the move might trigger more selling.

BP plc (NYSE:BP) is an oil and petrochemicals company. The integrated oil company explores for and produces oil and natural gas, refines, markets, and supplies petroleum products, generates solar energy, and manufactures and markets chemicals. BP was founded in 1889 and is headquartered in London, UK.

BP's stock was trading in a well defined range with support at $37.49 and resistance at $41.59; given that this range was broken traders will be closely monitoring the stock?s price action for clues of direction.

From a technical perspective it can be expected that previous support becomes resistance, as the new range gets defined, however, given that BP's stock is still near the broken support, traders will be focusing on $37.49 to see if the stock can bounce back and return to its previous range.

Traders wanting to establish a short position in BP can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $37.49. For traders wanting to establish a long position, wait for price action to take the stock back to calculated support, which will provide a best entry point to build the position.