4 Trade Ideas for BP: Bonus Idea

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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