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Widening My Distance From BP
Saturday, June 26, 2010, by Stathis
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Two weeks ago, I made a brief post stating that I pulled out of BP and was going to stay clear (at least on the long side) because I had some pretty good indicators that told me shares were headed for a new low, below the $29 dollar mark.  http://www.avaresearch.com/article_details-567.html

On Friday shares fell just below $27. 

Other than a possible short-term bounce (which I would not try to play if I were you), I expect shares to continue further. 

In short, even if you are an optimist, I don't see shares moving up (at least trendwise) anytime soon. I can tell you that based on developments over the past 3 weeks I have some serious concerns which have clouded any amount of certainty I had previously.

At this stage, there is a good chance BP will carve up a good portion of its business and sell it off, not so much due to financial pressure, but political. I would not expect this to happen anytime soon, but I would say there is a better than 50:50 chance this could happen over the next 2-3 years.

I think (my guess) BP is in informal discussions with some Wall Street firms to assess these possibilities. This suspicion is not based on rumor nor is it based on fact.

Furthermore, in contrast to my previous expectations, I am convinced that any potential market sell-off would take BP shares down with it because the uncertainty is so high on the street that funds are not likely to see any price as undervalued at this point. When uncertainty is very high, it is almost impossible to detemine valuations.

As a result, I cannot see myself taking interest in a long position anytime soon. In fact, I do not know if there is any price I would buy shares right now due to the high level of uncertainty.

The shorts continue to look much better. 

Remember, previously I was fairly optimistic on BP, and I laid out a fairly reasonable entry point based on my level of certainty at that time.

Things are much different now.  You are best to stay clear and let developments play out, unless you have a better gauge of certainty than me, which might be the case because mine is now very low. There are too many complicating factors at play right now.

Keep in mind I do not watch TV, so I am not exposed to the drama that I would imagine consumes some channels.  My analysis is based on other factors. 

 

 

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