The BP share price finally succumbed to the slump in oil, sliding 4.90% to 287.75p, which could spell trouble for shareholders. Over the last week, BP has given back much of the price boost it received following impressive second-quarter earnings. The share price has now dropped more than 8% since the 11th of August and 15% from the June high. And whilst BP is 12% higher year-to-date, it may soon erode that gain.
BP plc (LSE: BP) had held up remarkably well, considering energy prices have been under considerable pressure of late. However, the oil supermajor is now starting to price in a gloomy outlook. Whilst increasing crude oil output may have triggered the breakdown in oil prices, the slowdown in China and a rising dollar is adding to the woes.
Recent economic data from China indicates the world’s second-largest economy is slowing down. Furthermore, a broad-based decline in commodities may soon lead to index-related selling. Energy products typically account for a large percentage of commodity index weightings. Therefore, should investors pull funds from these indices, Oil prices may fall lower. And if that happens, additional pressure will find its way to the BP share price.
Are BP’s Techicals Breaking Down?
The daily chart does suggest the technicals are showing signs of stress. BP has now broken below the 200-day moving average at 292.25p. Additionally, the 50-day at 306.23p has crossed below the 100-day at 307.07p, suggesting deteriorating momentum.
Furthermore, the Moving Average Convergence Divergence Indicator (MACD) has turned negative, and the Relative Strength Index (RSI) is pointing lower. These factors should combine to force BP lower towards July’s low of 276.30p. However, a deeper sell-off could extend to this year low at 250.35p.
Although this negative view depends on the BP share price being below the 200 DMA, and should it recover 292.25p, it will invalidate the immediate bearish outlook.
BP Share price Chart (Daily)
For more market insights, follow Elliott on Twitter.