BHP Billiton (BHP) has had a stellar run in the last six months, climbing more than 20% over that period while the S&P posted performance that clocked in at around half that. But BHP looks like it's finally rolling over. Here's what to watch for in this commodity giant.
BHP is currently forming a head and shoulders top, a price pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. The sell signal comes on the breakdown below the pattern's "neckline" level, in this case at $76.
Momentum, measured by 14-day RSI, has been in a downtrend since all the way back in December, when BHP first started showing signs of weakness. Since momentum is a leading indicator of price, it adds some significant evidence that BHP could be in for lower levels. On the move below the neckline, I'd recommend keeping a protective stop at $77.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts