BP Breaks Down through Open Air into Key Target
This morning’s session for BP has been a windfall for the bears.
However, shares trade on the “edge” of a support level that – if broken – simply opens price to a further sharp decline.
Let’s pinpoint this level and the view our “Color Value Area” Chart for BP:
For starters, BP has reversed into a short-term downtrend after peaking (with a lengthy divergence) into the $54.00 per share area.
Price broke support and the Moving Average Orientation flipped bearish at the start of August 2014.
From there, shares continued the slide and recently triggered a quick bear flag entry into the falling 20 day EMA.
Today’s sharp gap and sell-off took price rapidly into the key inflection point and target near $45.00 per share which represents:
- The 61.8% Fibonacci Retracement
- The Gap-UP Opening from October 29th
- The Lower Bound of a Value Area Pocket (see blue chart below)
Ultimately we’ll watch closely to determine whether shares rally up off this support level (see my prior update on Apple AAPL for a similar support-bounce into target opportunity) or else collapse through it into an “Open Air” pocket.
Let’s take a look at the Value Areas and current Open Air Pocket for shares if price stumbles here:
I’ve customized the Radar Indicator (similar to Market Profile but with better visuals) from TriggerCharts.com.
Without getting too complex, all we need to view is the Value Area (yellow lines with highlight) cluster just above the $46.00 per share level. That’s our focal point at the moment (and price trades beneath it).
The other focal point is the smaller Magnet (Value Area or yellow line) near $43.50 per share from April 2013).
Should it come into play on a very sharp sell-off, the next target (Value Area Magnet Cluster) would be the $41.50 level.
Nevertheless, the focal point now is the “Open Air” between the $46.00 level and lower $43.50 target.
At the moment, price is falling sharply like a rock through the Open Air which is what one would expect (there wasn’t much “price at time” transacted between $43.50 and $46.00 as highlighted by the lack of yellow lines).
Should price fail to hold the key $45.00 per share target as mentioned above, it does continue the decline toward the $43.50 Magnet Target.
Continue focusing on current levels and the Magnet Areas (yellow) highlighted above when planning trades in BP.
Corey Rosenbloom, CMT
Afraid to Trade.com
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).