Short-term traders can look to go short in the stock for a possible retest of Rs 510 levels in the next 3-4 weeks, suggest experts.
The paint stock hit a high of Rs 679 on 22nd September 2023, but it failed to hold on to the momentum. The stock closed at 554 on 9 February 2024 which translates into a downside of over 18%.
The stock also breached the rising trendline resistance on the downside on the weekly charts which suggests that bears are in control and could push the stock lower.
The performance of Berger Paint stock is also in line with the underperformance seen in the Consumer discretionary stocks, especially the paint segment.
It has been observed that the index has been trading within a broader range of 22100 to 21000 for the past 35 trading sessions, with indications that the index is reacting from the upper band of consolidation.“Consumer discretionary stocks, particularly in the paint sub-sector, have shown an underperformance trend. Berger Paint, for instance, has experienced a sharp reaction from its previous resistance level,” Kapil Shah, Technical Analyst, Emkay Global Financial Services Limited and Trainer at FinLearn Academy, said.“The stock is currently resuming a bearish trend after a dead cat bounce. Its recent rise was short-lived as it faced resistance at higher levels, followed by a breach of the rising trendline. Additionally, the stock is sailing below its short to long-term moving average,” he said.
In terms of price action, the stock is now trading below most of the crucial short- and long-term moving averages such as 5,10,30,50,100 and 200-DMA on the daily charts.
The daily Relative Strength Index (RSI) is at 39. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed. The daily MACD is below its Signal and Center Line, this is a strong bearish indicator.
“An analysis of the broader structure of Berger paint suggests that it offers a short opportunity in the range of 550 to 560, with a stop loss of 570. There is a significant possibility that the stock may have a downside potential of up to 510,” highlighted Shah.
“This presents an ideal opportunity for investors to take a short position on Berger Paint. In conclusion, given the current market situation, it is prudent to identify weak stocks to maximize investment returns,” he said.
“Berger Paint, with its bearish trend and short opportunity, presents a viable investment opportunity for investors,” recommended Shah.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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