What Are The Chances Of Near-Term Gains In BP Stock?

August 12th, 2021 by Trefis Team
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Oil prices have remained high due to ongoing inventory draws in the U.S., OECD countries, and other parts of the world. Notably, the crude oil and gasoline inventory levels in the U.S. and OECD countries declined by 2% and 1.4% (q-o-q), respectively, in Q2 2021. Thus, integrated oil companies including BP (NYSE: BP) have observed top line improvement and operating cash generation in recent months. At $60 per barrel of Brent, the company is targeting $1 billion quarterly share buybacks with a 4% annual growth in dividend per share. The company has been focusing on its low carbon and convenience business to transform into an integrated energy company. Considering the trends in stock price data, BP stock is likely to move 0.4% in the next one-month (twenty-one trading days) period after experiencing 5% growth in the past week (five trading days).

But how would these numbers change if you are interested in holding BP stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test BP stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

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IF BP stock moved by -5% over 5 trading days, THEN over the next twenty-one trading days, BP stock moves an average of 1.7 percent, with a 51.7% probability of a positive return over this period.

Also, given a -5% movement for the stock over five trading days, it has historically witnessed an excess return of 2% compared to the S&P500 over the next 21 trading days, with a 56.3% probability of a positive excess return.

Some Fun Scenarios, FAQs & Making Sense of  BP Stock Movements:

Question 1: Is the average return for BP stock higher after a drop?

Answer:

Consider two situations,

Case 1: BP stock drops by -5% or more in a week

Case 2: BP stock rises by 5% or more in a week

Is the average return for BP stock higher over the subsequent month after Case 1 or Case 2?

BP stock fares better after Case 1, with an average return of 1.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.4% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how BP stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold BP stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For BP stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

BP’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for BP stock by changing the inputs in the charts above.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.

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