How High Can the BP Share price Go? The answer, Much Higher

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Written By: Elliott Laybourne

Oct 06, 2021, 09:51 BST 09:51

Summary:

The BP Share price has performed well this year. However, surging energy prices signal the supermajor has more upside ahead.

The BP share price has performed well this year. However, surging energy prices signal the supermajor has more upside ahead. BP (LON: BP) closed at its highest price in over a year yesterday as investors wagered raging energy prices would push the stock even higher.

Supply chain disruptions and massive speculative inflows are causing energy prices to explode. Brent crude oil is up 60% year-to-date, trading at $82.50 a barrel at a three-year high. Natural gas and Heating Oil are experiencing similar parabolic moves higher, and energy stocks are starting to catch up. As a result, the BP share price has surged 15% over the last two weeks. The impressive rally has forced BP above several technical resistance levels, which may lead to momentum chasers exaggerating the gains. Whilst this could cause the share price to spike dramatically from here, chasing it higher is a risky endeavour.

Price Analysis

The daily price chart shows that BP has burst out of a symmetrical triangle pattern. Additionally, the price is above the 50, 100, and 200-day moving averages. Furthermore, the 50 DMA at 307.67p is above the 200 at 301.14p and approaching the 100 at 309.82, reinforcing the bullish momentum. The BP share price could extend towards the gap on the chart at 384p, erasing all of the covid pandemic losses, considering the velocity of the move. Furthermore, if energy prices continue to squeeze higher, an argument can be made for the 420p-440p area.

However, the Relative Strength Index reached 79.5 yesterday, indicating the rally is overstretched. This isn’t to say the price can’t go higher. However, previous times the RSI has exceeded 70 a pullback in price has followed. Also worth considering is the economic damage high energy prices are causing. Therefore, OPEC and its allies will face pressure to increase production, and nation-states may release their strategic petroleum reserves. Therefore, whilst the immediate outlook is bullish, the higher the price, the higher the risk. On that basis, investors may wish to ride the rally higher whilst being mindful to manage risk accordingly.

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Written By: Elliott Laybourne

Elliott Laybourne is an accomplished Hedge Fund sales and Investment bank trading specialist. Elliott also started a successful Base Metals Brokerage business in partnership with ABN AMRO clearing bank. He worked on the open outcry trading floors at the London International Financial Futures Exchange 'LIFFE' and the London Metal Exchange 'LME.' He also provided research and execution services for Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and Pennsylvania State Public School Employees Retirement System, as amongst others. Today, he focuses on providing trading consultancy and business development services for family office and brokerage clientele.