Long Term Investment: Berger Paints India Ltd. : IDBI Capital
Berger Paints India Ltd is the third largest paint manufacturer and the second largest decorative paint player in India. The company is engaged in the manufacture and sale of decorative and industrial paints and coatings.
The monthly Log chart where we see that prices overall have been on an upward journey. No doubt there have been lengthy periods of decline after conquering new peaks, but those have been used wisely to buy into, thereby giving rise to a strong advance each time. The sharp rally since mid 2003 led prices to breach a strong primary rising top-totop trendline (green line) and rocketed to 
a high of 68.5 during Jan 08. Topping out there owing to market pressure and on heavy profit booking prices collapsed, retracing about 62% of the prior entire rally. This support was combined with the rising trendline, which was earlier a strong resistance. Managing to bottom out at a low of 26 during Oct 08, prices bounced back from the double supports in the following months.
This pullback from the low has been highlighted in detail in the weekly chart appended below. We can see that prices since the decline in Jan 08, had been constantly struggling to exceed the 30-period EMA. Also we can see that since March 08, prices had been witnessing some good accumulation, forming a nice pattern along the way.
The pick up from Nov 08 onwards finally led prices to breach the moving avg region and with a steady rise thereafter, prices moved up smartly to complete the
pattern at 67-68 levels. Unable to breakout decisively from there had pushed prices into a sideways range bound phase for a long period of 9 months. On the downside, the moving avg was doing a splendid job of holding prices up and not letting them slip lower. Last weeks sharp rise has finally broken beyond this phase and closed higher. This was followed by RSI exiting 60 and moving into bullish zone. Volumes were huge during the breakout, indicating excellent bullish participation.
With the trend looking set for some fresh rallies ahead, buying can be considered now or dips to 66-65 for target of 105-08 (pattern target) / 130-34.
Source : IDBI Capital
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Category: Long Term
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