Shares digital

BP (BP.) 522.5p

Recession fears saw the price of oil retracting this week after touching all time highs at the start of January, but the black stuff is riding a bullish wave and this is why we suggest going long on BP. The shares have lost a big chunk of value this month, around 18%, both following the retracement in the price of oil and as a response to analyst guidance ahead of the finals in February. This all seems to be overdone and exacerbated by the current nervousness on the market. Richard Cunningham, managing director at City Index Advisory, believes that the shares are now trading more than 10% below City Index’s fair value estimate. He adds that the stock’s relative strength index now has ticked back to 22, which indicates that BP’s shares are historically very oversold. We suggest buying now on a four week time frame, and placing with a wider stop loss to offset the currently high volatility.

ACTION: BUY BP • Target 575p • Stop Loss 490

TIME TARGET: 4 WEEKS