Berger Paints forms double top pattern

The stock of Berger Paints has formed a spinning top candlestick pattern as of May 20, 2020. Thereafter, it entered into an uptrend and recorded series of higher highs & lows.  

The stock has witnessed nearly 90 per cent upward momentum from the low of Rs 431.45. On January 11, the stock had formed a swing high of Rs 819.85 as well as a reversal Doji candlestick pattern. Thereafter, the stock witnessed a minor correction and touched the level of Rs 764.15. However, the stock failed to sustain at lower levels and the prices attempted to return to the previous trend, but the bulls were not able to push the prices much higher. As a result, the stock registered an almost identical top on January 21, 2021. This resulted in the formation of Adam & Adam double top pattern.    

On Monday, the stock had given a neckline breakdown of Adam & Adam double top pattern. Along with this neckline breakdown, the stock, after a span of over four months, had closed below its crucial short-term moving average i.e. the 34-day EMA.   

The leading indicator i.e. the 14-period daily RSI has cooled off after touching the zone of 84-86 and at present, its reading is 45.62. The RSI is trading below its 9-day average and it is in a falling mode, which indicates a further downside momentum. The stochastic has also given a bearish crossover on the daily chart. The daily MACD stays bearish as it is trading below the zero line. The histogram is suggesting a pickup in the bearish momentum.   

Besides, there has been a negative divergence between the daily RSI, daily stochastic and the stock price movement, which suggests a limited upside.  

Going ahead, we expect the bias to remain negative as long as the stock sustains below Monday’s high of Rs 778.90 level. On the downside, the level of Rs 723, followed by Rs 700 would be seen as the next support zone for the stock.    

On Monday, the stock of Berger Paints Limited dipped by 3.23 per cent and closed at Rs 748.45 per share. The stock opened at Rs 778 per share and hit an intraday high of Rs 778.90 & a low of Rs 737.10 per share on NSE.