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Last month, thanks to a few hilarious clips from both the Daily Show with Jon Stewart and the Colbert Report, I wrote that BP was the ultimate contrarian call.
A few quiet rational voices were mentioning that valuation had become a little too compelling to ignore. But the stock price’s swan dive into oblivion was drowning out these and everything else. In hindsight, the contrarian nature of the situation is rather obvious.
To be fair, I wrote about the “ultimate contrarian call” over the weekend (June 12th). On Monday, June 14th BP shares closed at $30.67 and fell a little more in the following days. At the lowest point, they were $26.75 towards the end of June 2010:
BP’s bounce higher coincided with the general market’s recovery at the end of June. As the saying goes, a rising tide lifts all boats. But considering that BP was a very special situation, it recovered much more than your average stock from the lows of early July. Interestingly, it bottomed ahead of BP caping the leaking Deepwater Horizon well.
In fact, overlaying a simple Fibonacci retracement level of 38.2% we can see that BP’s share price just reached the $40 level before weakening. The dropping 50 day moving average (blue line) also acted as a resistance or target area. The next level to watch for on the upside is the gap from late May 2010 at $42.50/share.
Looking at BP’s chart again and pretending that there is no story behind it, I’m reminded of the “Great New Pattern”.
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