We covered BHP Billiton (BHP) a month ago. We looked for a small consolidation/pullback before renewed gains -- "prices could stall or even pull back to $36 or a tad lower. With the overall strength in BHP, I would consider this kind of shallow pullback a buying opportunity."
With hindsight, we hope you followed those words and bought.
Now that BHP has had that pullback, we remain bullish on BHP in particular and commodity plays in general in 2017 as I suspect they will be an area of outperformance in the market.
In this one-year daily chart of BHP, above, we can see the December pullback and test of the rising 50-day simple moving average line. Prices broke below the line and are now back above it. The slope remains positive, which is the direction we want to trade in.
The On-Balance-Volume (OBV) line only went sideways when BHP declined, telling us that there was no significant liquidation or aggressive selling the past month. The Moving Average Convergence Divergence (MACD) oscillator signaled a cover shorts buy signal and could soon give us an outright go long signal as it crosses back above the zero line.
In this three-year weekly chart of BHP, above, we can still see a bullish alignment of the indicators. Prices are above the rising 40-week moving average line. The weekly OBV line shows accumulation and/or aggressive buying the past year. The MACD oscillator crossed to a liquidate longs signal as prices declined last month, but renewed price strength could switch us back again to the long side.
In this long-term Point and Figure chart of BHP, above, we can see that prices came down to retest their 2008 lows and that there is a lot of upside potential going forward; $48 might turn out to be an intermediate-term target.
Strategy -- hold longs and add on strength.