This is probably the most popular stock in Australia. Between 2003 and May last year, it has also been a top performing stick, rising by almost 500% in 5 years.
From a low of $8.4 in May 2003, it bounced to $50 in May 2008.
BHP has a similar technical configuration as Rio Tinto. Where Rio is capped at $54 by a gap created in last November and which is now a strong resistance level, BHP is capped at $34 by an identical gap.
This gap was generated in the very last days of September (blue ellipse on the chart). It was also a previous low posted on September 10 (point A) that became a new high (point B) last month. This is therefore the immediate and main resistance level to the current price action.
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6 months only were enough between May and November last year to retrace a 30-month rally. The low of November at $20 (point C) has been the new point of inflection, the new starting point of a potential long-term rally.
However the price action even failed to fill the gap opened in last September. It failed to jump back to $34 and peaked at $33.16 in January then at $33.86 last month (point B). Those two failed attempts are significant and that’s why the gap will strongly act as a resistance level in the future.
In trading, gaps are common patterns that are easily identified. A gap that is filled is usually the signal for a trend reversal. This is exactly what happened here when the price action reached this level and immediately corrected. This correction ended on the 50% Fibonacci retracement level (point D) of the rally occurred between November and February (between points C and B).
The stock rebounded on this level (around $27) and closed yesterday at $30.5. A new attempt to reach and break the resistance of $34 is now expected as the technical indicators turn bullish. The MACD just crossed above its signal line and the RSI is soaring.