In my Stock Watch video two weeks ago (http://www.finnewsnetwork.com.au/archives/finance_news_network76889
), I explained that BHP should fall back towards $35.50. A breach of that could see it dip towards $31. Now that it has hit that $35.50 area as expected, we would expect to see a bounce in the order of $1.50 - $2 from here. The reason why it may not crash through it this time is because by hitting that support level very quickly, the stock has become oversold on the RSI (circled) and moving back above the oversold line has now triggered a short term buy signal. So the stock should bounce here, but any rally back towards the top of the recent range could then be sold again.
If you want to take advantage of some short term upside in BHP, this is a basic credit spread that I put in place for clients yesterday. It works like this. We sell a $36 July put and then use some of those proceeds to buy a $35 July put. At time of writing, it is generating about 50c in premium. Maximum profit is 50c and that is if BHP is trading above $36 at July expiry. Maximum loss is 50c if BHP is trading below $35 at that date. In the meantime, the position will move between profit and loss as BHP’s share price moves. We can also close it off early if we wish to take an earlier profit/loss.
As mentioned above, our target for BHP is back towards the top of the recent range, so if it hits that, we will look to close our bullish spread and contemplate opening a bearish one.