The collapse of BHP’s share price on Wednesday comes as a surprise, in what has been a dramatic reversal of fortunes. One day, it topped the gainers’ chart and the next, it is right on top of the losers’ board. The stock crash comes amid investors’ concerns over the $29 billion valuations of the proposed merger between BHP Group’s oil and gas division and Woodside Petroleum.
Woodside’s share price took a colossal hit from the pandemic, as energy prices collapsed in 2020. Some of the assets that the company has to take on are ageing assets that require some investment to revamp or decommission.
Investors now doubt the company’s capacity to push through a deal of such magnitude and still have reserves to ride the COVID-related shakeups in the oil industry. This is why there is such a huge selloff on BHP’s shares this Wednesday.
The BHP share price is down 5.66% as of writing.
The active daily candle has engulfed the Tuesday candle, breaking down the channel’s lower border in the process. It has also taken out the 2264.5 support and is heading towards the 2198.5 support level. If the candle closes as is, the engulfing pattern could point to even more downside moves. This setup could initiate a breakdown of the 2198.5 support via an outside day candle, which clears the pathway towards 2127.0.
Only a late rally by bulls to send the price back above 2264.5 and towards 2330.5 would save the day here. If this plays out, then 2401.5 becomes a new target, invalidating the bearish engulfing candle pattern. This move would also set the price on course towards the expected bullish continuation from the rectangle. A break of 2401.5 is needed to achieve this.
Follow Eno on Twitter.