BP reports $6.3 Billion loss – What to expect?


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BP Reports $6.3 Billion Loss

 What to expect?

 

When BP reported its $6.3 billion loss, they also warned that the low oil prices are going to stay. Although BP is continuing to cut their costs, this just means the losses will be smaller in the next coming months or years. With no positive news from OPEC to reduce production, things will not look positive anytime soon.

 

Looking at the Charts – Making Sense of the Movements

BP006

Taking a quick peek at their stock price above (2 year chart), the stock took a beating since July 14 after the uncertainties of the oil production kicks in. The beatings took a break in mid Dec 14 and the stock price recovered slightly riding on the rest of the market movement when Dow made it’s new high.  The stock price continued to fall when Q1 results confirmed the impact on it’s business in mid April 15.

 

Drawing the Lines

BP Chart 2 yrs

This is an illustration of the trendlines drawn to indicate the market movements. The bold red line shows the initial down trend, followed by the green channel which shows a small uptrend (this may be a recovery within a bigger downtrend). The orange line indicates the start of the new downtrend and the dotted purple line indicates the major downtrend. It so happens that the bigger downtrend is the same gradient as the smaller downtrend.

Putting together the news and the market movements, the sharp downward that happened lately move could have factored in some of it. Can’t be certain if it is related to insider tradings but many times, news leak somehow or another.

Looking forward, the most like two scenarios will be

1) The stock price going lower

2) The stock price bouncing in a horizontal range with high limiting around his recent high of 43.6

3) Of course we cannot rule out the price shooting higher than 43.6 but chances of this happening needs to be backed up by some unique scenarios like positive news of oil productions or BP rolling our some new profit making business or riding on another Dow record, etc.

If you are betting (1) then read further. 

 

Looking at the long term charts – 10yr chart

 

BP003

The stock price is now trading at a support level of 36. If broken , we will be seeing it test the next supports at 35, and very quickly down to 30 which is a psychological barrier and 28.88 which is the low seen on this chart. Since 30 and 28.88 is quite close, this should act as a strong support.

BP should be reacting quickly if they see their stock price falling to such levels. But if results are still unsatisfactory, even a strong support will not hold.

 

Hope this helps you see how you can apply Trend Lines and Supports & Resistances in real scenarios.

 

Read on

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