The BP share price is trading 1.62% lower this Friday, extending the slump seen on Thursday as the stock looks set to begin a correction round after a three-month surge.
The BP share price is currently in overbought territory, and several factors provide the fundamental triggers for a correction from the 2022 highs. Recently, the UK government imposed a 25% windfall tax to help pay for energy subsidies to UK households. This tax will require oil and gas companies to pay a portion of profits deemed to have been made by the conflict-triggered rise in energy prices. BP has responded to the move, saying it will reconsider a planned 18-billion-pound injection into investments it wanted to make in the UK economy.
In addition, the imposition of new lockdowns in China is putting pressure on oil prices this Friday. Despite Brent crude oil recovering from session lows, the price action remains capped at the $123/barrel price and has been unable to exceed this price point since it was first tested on 24 March.
Technically speaking, the daily chart of the BP share price shows a rising wedge pattern in evolution. This could support the outlook for a correction soon unless the bulls form new 2022 highs.
BP Share Price Outlook
The weekly chart (not shown) shows that the weekly candle has condensed into a pinbar, courtesy of rejection at the 453.70 resistance. On the daily chart, the weekly candle’s move is shown as a bearish engulfing candle formation, followed by a bearish outside day candle. This outside day candle looks set to test support at the 439.40 support (29 November 2016 and 7 June 2022 lows). A breakdown of this pivot will open the door toward 430.90, the 1 June low. Below this level, a deeper correction will target the 6 May/24 May lows at 418.90, leaving the 410.0 psychological support (19 May low) and the 405.70 price mark as the additional southbound targets.
On the flip side, the uptrend will resume if the bulls successfully uncap the 453.70 multi-year resistance. Above this level, subsequent targets to the north are found at the 478.75 resistance (30 September 2019 lows) and at 520.00 (29 January 2018 and 16 April 2018 highs).