Banking BP

At the end of August my MIDAS system gave a very clear read on BP. It said to buy.

And so buy I did.

I managed to open at 441p and today sold out at 485p for a fantastic, leveraged, tax free profit!

I saw Zak’s video this morning suggesting there was more upside to come for BP, but in my position I was happy to bank the profit. From a MIDAS perspective, what’s just happened with BP is a fairly common occurrence; a beleaguered stock in a bull market pulls back to long term primary support and then spends a couple of months consolidating at that level. During this time management becomes increasingly exasperated with the stock’s performance (after all those bonuses aren’t given out for languishing share prices!) and surprises the market with a positive corporate action. Usually this comes in the form of a share buyback or, as in the case of BP, a surprise dividend.

I first identified this type of MIDAS trade several years ago with an American company called Crane (CR). CR was one of the founding constituents of the S&P500. It was one of the old timers of the market. It had been in the doldrums for years, but followed a similar consolidation pattern to BP at long term primary support. A new management team joined CR and at the start of the following quarter introduced the first dividend in years. WHACK! up shot the share price.

OK, so I have to admit I didn’t foresee exactly this happening with BP, but as I’ve said before one of the key lessons my mum taught me growing up was that you make your own luck by making good decisions. For MIDAS traders this means following the signs and combining it with a decent enough understanding of the stock or financial instrument you are trading.

Below is the MIDAS chart I published in the original piece:

The triple confirmation of JUN2010 support was critical.

Unfortunately my MIDAS system is undergoing a bit of an overhaul at the moment so I can’t publish the latest chart, but I plan to do so as soon as I can.

In my original call on BP I said “The charts suggest there is resistance at about 475-480p, but I would probably seek to start to derisk at 452p (the 200MA).”

Obviously, I didn’t get the chance to derisk, not that I’m complaining! However, it is interesting that the price has settled tonight at 482p. Even though I am now out, Zak feels there could still be some upside. Have a look at his video here.  

So, all in all it’s been a great day; but not as great as yesterday…