After a correction earlier this year, BHP Billiton (BHP) made a small double-bottom pattern in May and June. Prices have climbed steadily over the past few weeks, and are now poised for a test of their January highs.
Let's check the latest charts and indicators to see if prices can follow through on the upside. In this daily bar chart of BHP, below, we can see a rally and a correction that dominated much of the past twelve months. From last July until late January, BHP traded higher, with a rising 50-day moving average line and a rising 200-day average line.
Prices made a lower high in February and then a lower low in March to start a downtrend. Prices corrected from above $41 to below $34 by May. In late May, there was a bounce to the upside that lifted prices above the declining 50-day average and above the rising 200-day average line.
Prices pulled back to successfully retest the May low in June. A stronger rally took hold in late June to break above the May high. Halfway through July, BHP is above both the now rising (again) 50-day average and the 200-day average.
Now check out the bullish movement of the On-Balance-Volume (OBV) line, as the line rose with the price action from July to February -- showing that buyers of BHP were more aggressive. As prices corrected in March through May, the OBV line only made a shallow decline -- telling us that investors stayed largely bullish. In June, the OBV turned higher again with the price action. The trend-following Moving Average Convergence Divergence (MACD) oscillator is above the zero line in a bullish mode.
The "bigger picture" can be seen in this weekly chart of BHP, above, showing a decline from above $65 to a brief move below $20. Prices doubled from $20 to $40 with the 40-week moving average line reversing from a downtrend to an uptrend. The weekly OBV line rose for the rally and then pulled back during the correction earlier this year. In the bottom panel, the MACD oscillator on this timeframe is poised to turn up to a fresh go long signal.
In this Point and Figure chart of BHP, above, we can see only one trade at $40 as resistance. A trade at $41 will be a breakout and allow for a $49 price target/projection.
Bottom line: With bullishly aligned daily and weekly bar charts and only limited resistance seen on a Point and Figure chart, we have to have a positive or bullish outlook for BHP in the weeks ahead. Traders could approach the long side of BHP risking below $36 looking for a rally to the $49-$50 area.
