Q2 STOCKS TO BUY

BP plc (BP) Faces a Tough Challenge at the $40 Level

BP plc (ADR) (BP) is staring down options- and trendline-related resistance ahead of January expiration

Jan 13, 2017 at 12:58 PM
facebook X logo linkedin


Shares of oil major BP plc (ADR) (NYSE:BP) have been on a tear higher in recent weeks, jumping more than 16% from their mid-November lows around $32.50. However, the oil-and-gas stock may have its work cut out for it if it wants to extend its lead any higher. Ahead of next week's January options expiration, BP is staring down potentially stiff resistance in the $40 neighborhood.

Specifically, Schaeffer's put/call open interest ratio (SOIR) of 0.58 registers in the 24th annual percentile, indicating near-term option players are more call-heavy than usual. In fact, six of BP's top 10 open interest positions are front-month calls, set to expire next Friday, Jan. 20. And leading these positions is the January 2017 40-strike call, which is currently out of the money.

Going into expiration week, this large amount of overhead call open interest could pose a potential problem for BP shares. Given that peak open interest currently lies at the overhead 40 strike, this area could exert options-related resistance to squash BP's run higher. There are 37,082 contracts in residence at the January 40 call, which is equivalent to 3.7 million shares. Based on the 10-day moving average of BP's trading volume, which is 5.7 million shares, this heavy accumulation of out-of-the-money calls accounts for 65.5% of BP's average daily trading volume -- an amount significant enough that the unwinding of hedges related to this call open interest could certainly keep a lid on the shares as expiration draws closer.

So far today, BP has traded on both sides of breakeven, and currently sits 0.1% higher at $37.80. The stock has stair-stepped its way to a 22% year-over-year gain, and notched an annual high just last week, before retreating back to its 20-day moving average.

But potential options-related resistance is not the only problem BP plc (ADR) (NYSE:BP) faces in its journey higher. Its 160-week moving average is also near the round $40 mark, currently perched at $39.21. This trendline has worked against the shares in the past, previously capping BP's 2015 highs. As a result, the prospects for additional short-term upside from BP look extremely limited.

170113BP

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


 
 

“Buy This Stock Now!” - Expert Who Called 11x On TSLA

He called a rare 11x on Tesla…

But now, thanks to Elon & Trump’s new alliance…

He says there’s a new opportunity that could be 1,000x BIGGER than Tesla – and it could completely revolutionize a $23 Trillion market.

It’s trading for less than $5 per share right now…

But it won’t be under the radar for long.

Discover The 1,000x Bigger Elon Opportunity Here

GRAND SLAM COUNTDOWN

 
 

Featured Articles from Trusted Partners:

👀Learn How Dividends Create Passive Income for Life
Receive $200 Off Motley Fool Epic. The Motley Fool Epic $299 discounted offer is based on $499/year list price. Introductory promotion for new members only. Take control of your money and your portfolio with Motley Fool Epic.

💵New Income System Could Pay You $4,243 Monthly
You could collect an average of $4,243 per month starting as early as next week with a new payout system for income investors. New registrations are being accepted for investors who want to be in a position to start with their first payout next week.

🚀Easy 92% Crypto Dividends (No Coins Required)
COIN stock doesn't pay a dividend... But there's actually a new way to collect a massive dividend that's indirectly based on the stock and offers a terrific monthly income (currently yielding nearly 92% on a forward basis).

🤝Free Advisor Match with Wiseradvisor.com
Don't leave your retirement to chance! Get matched with a trusted financial expert for FREE and make the most of your tax refund. Get started now.

⚠️Dennis Quaid's #1 Warning for Americans
Here's the thing: life doesn't come with guarantees. The economy shifts, markets stumble, and years of hard work could slip through your fingers like sand. But it doesn't have to be that way for you. So request a free copy of this Gold & Silver Guide that will arrive right to your doorstep when you act now.

 

 
 

Follow us on X, Follow us on Twitter