Here's Why I Bought BP

Yesterday I opened a long bet in BP. It might have looked mad but the bet carried less risk than most of my trades.

It’s quite ironic really how many ‘Cor you’re brave’ comments I’ve had since buying BP yesterday. The irony is that I was exposed to less downside risk than on my normal index and forex trades, and it was my only profitable trade yesterday! Sure, I probably was mad, and the trade could have died within minutes, but the simple use of a stop loss meant that I was as chilled as a pint of Magners.

There was nothing clever about my trade plan; I just figured that with the media and newswires on bad-news overload a fair amount was priced in; I think the market had even priced in a fair amount of bad news that we don’t yet know about. Whatever, I won’t pretend to have a clue about the fundamentals or future litigation fears.

The daily RSI stood at 23 and although the price fell below Tuesday’s closing level it hadn’t challenged the previous day’s lows. I opened my long bet at 417p with a stop loss just below the recent low at 405p; on a £6 bet that was only a risk of £72. With all the ongoing uncertainty I was never going to commit much capital to the trade, but the potential risk/ reward appealed to me.

My stop loss is now at 420p, which admittedly won’t help me if something horrible happens when the markets are closed, but it cuts down the odds during UK time. There’s too much going on to have much idea of where the price will go (I’ve heard management will be making a statement tomorrow), but for now I’m looking at a 50% retrace of Monday’s fall at 462p. With the 21-day moving average well below the long term 200-day average the chart remains bearish, but I’m now running a free bet with plenty of upside potential if the big funds decide to look through the current mess. If things go belly up, and there’s obviously the risk of a negative announcement on the dividend, then I’m out for a few quid profit.

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