BHP Billiton (BHP) Fights To Stay In Trading Channel

Much to the bears’ frustration, last week’s profit-taking wave was very short lived despite the countless experts who continue to call for a market top every time equity indexes post a fresh high. Although bargain buyers have been quick to step in at every pullback, this recent sell-off may hold more weight from a technical perspective. Last week’s bearish pressures dragged the S&P 500 Index below the 1,500 mark, which is a psychologically important support level. Failure to settle above this level in the coming days could welcome accelerating selling pressures, which should pave the way higher for gold; gold is still struggling to recover from its steep losses over the past two weeks  [for more market news and analysis subscribe to our free newsletter].

Chart Analysis

Diversified mining giant BHP Billiton (BHP) warrants a closer look from anyone looking to favorably position themselves in anticipation that the equity space bull-run will resume full force over the coming weeks. BHP sank alongside major equity indexes last week when mixed commentary from the FOMC minutes spooked investors. What’s noteworthy is that this commodity producer is resting on a key support level, which may entice risk-tolerant investors who are looking for bullish chart setups. Notice how this stock has moved higher within a crudely defined trading channel (red lines) since bottoming out around $60 a share during July of last year.

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With BHP floating around $75 a share, we can see that this stock is trading in the bottom half of its channel right along its rising support  line; this presents an attractive buying opportunity as traders can favorably position themselves to reap the benefits of a strong rebound in BHP while still keeping a close watch on downside risk. We advise setting a stop-loss right around $72.50 per  share in case selling pressures intensify and knock BHP out of its longer-term trading channel [see 5 Commodity Trading Mistakes You Could Be Making].

Outlook

Assuming that investors regain their risk appetite over the coming weeks, BHP should rebound higher and resume its longer-term uptrend. If selling pressures stick around, however, BHP could fall out of its channel, which would be worrisome. In terms of downside, this stock has major support around its 200-day moving average (yellow line) near $70 a share. On the other hand, improving confidence on the equity front can bolster this mining behemoth higher. In terms of upside, BHP has major resistance at the $80 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

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Disclosure: No positions at time of writing.