BHP Overdone?

This story features BHP GROUP LIMITED. For more info SHARE ANALYSIS: BHP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Bottom Line 12/08/13

Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Flat

Technical Discussion

The critical juncture put forward during our last look at BHP Billiton ((BHP)) was $35.45 with a push above that level suggesting something a little more bullish was going to unfold.  Not only has that area been overcome but it’s been exceeded with a degree of attitude which can only bode well.  Having said all that the patterns on the daily time frame lack clarity which means we move back to the weekly chart this evening and try and gain some perspective of what’s likely to transpire over the coming weeks and months.  The next important milestone is the late February high just above $39.00 which should be the next port of call.  It’s probably not going to be a straight line rise into that target zone though there is now no reason why the current trend can’t continue, albeit possibly after seeing a pause for breath over the short term.  BHP doesn’t tend to make prolonged impulsive trends though looking on the daily chart (not shown) that’s exactly what’s been transpiring since June which again can only be viewed in a positive light.  For now though all eyes on the $40.00 mark and whether it can be overcome in the same vein as that seen over the past few weeks.  If it can then the longer term picture also becomes much brighter.

First of all it’s worth noting that the patterns from an Elliott point of view aren’t the most symmetrical we’ve ever seen.  And that’s quite a shame because a clear A-B-C correction terminated just over a year ago at the 61.8% retracement level as annotated.  Although a good rally ensued from those lows the subsequent retracement put paid to a longer term impulsive movement developing.  As such the count up to the February high remains unchanged with that pivot high likely completing an intervening wave-X.  One little known fact about combination patterns is that generally speaking once wave-X is penetrated the door opens for the corrective phase to have done its dash.  This would result in a much more bullish count being put forward though there is still plenty of work to do before overcoming that important juncture.  However, if our make or break point mentioned above at $40.00 can be penetrated there is no reason why $50.00 can’t be attained though we are looking a long way down the track now.  First of all let’s see if the recent show of resilience can continue to gain traction.  The one thing we need to be on the lookout for on the daily time frame is Type-A bearish divergence which is technically in position though it’s yet to trigger.  It’s also worth mentioning that our oscillator is sitting in the oversold position on the weekly chart.  So there are few headwinds to overcome though a small pull-back from here wouldn’t be major reason for concern, in fact it would be deemed as healthy, especially if accompanied by low volume.

Trading Strategy

The ideal situation from a trading perspective is to see a 3-wave retracement which would provide a very nice buying opportunity.  Of course whether it transpires we’ll just have to wait and see though unless a low risk entry presents itself I wouldn’t be inclined to jump on the trend here just for the sake of it.  The stock is looking a little overbought here so it would come as no surprise to see either a consolidation or a retracement over the coming weeks.  Should this unfold then we’ll be taking a closer look for sure though until that time we’ll just follow the price action from the sidelines only.

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