BP shares could be considered by investors seeking stability in times of volatility. The higher price of oil due to the conflict in Ukraine has provided support for the BP share price so far in 2022 and their 3.8% yield is attractive.
In a week Jeremy Hunt’s effort to steady the UK political ship was quickly scuttled by the departure of Liz Truss, investors may be seeking strong dividend payers such as BP to see them through any economic downturn.
However, those eyeing BP should take note of recent price action and why it may be beneficial to hold off buying BP in the very short-term.
Reason for caution comes from BP share price’s ascending triangle technical formation that is yet to confirm a breakout.
An ascending triangle formation is typically a bullish technical formation, however, this is only when the price breaks out and trades above levels of resistance.
BP shares currently have a strong level of resistance at 470p at which it has failed a number of times in the last time.
This would suggests in the short term – failing any new fundamental developments – the share price is likely to drift back down to the trend line commenced in November.
This would suggest the 430p-420p level will be retested before long. A bounce from these levels may provide a buying opportunity.
An alternative scenario would be a break above 470p. Should shares break through resistance at this level is would open the door to 500p. However, a move above 470p wouldn’t automatically confirm a bullish break out. BP shares would have to retest prior resistance at 470p and confirm this as a new support.
BP Fundamentals
Oil prices have driven BP shares since Russia’s invasion of Ukraine and gyrations in global energy markets will continue to impact BP. Oil prices have retreated markedly from highs above $100 which will be reflected in BP third quarter results due to be released 1st November.
Shell have recently said they were experiencing declining refining margins due to lower oil price. Expect BP to also see lower margins as a result of falling oil prices.
However, OPEC are determined to maintain a higher oil prices and the ongoing battle between OPEC+ and President Biden will likely provide support for oil prices, and therefore BP shares.
Brokers are reasonably positive on the BP share price with Bank of America increasing their price target to 550p and Citigroup 440p from 400p. Both have a neutral rating on BP shares.