Chart Review for Boral Limited

By Kenneth Robson on October 24, 2013 • ( 0 )

Probable long-term trend change f

I have looked at the building material manufacturer Boral before but have chosen to review it following an announcement that Boral Limited and US Gypsum Corporation will form a world-leading Plasterboard and Ceilings Joint Venture with an asset value of US 1.6 billion.

It will have operations in 12 countries across Asia, Australasian and the Middle East. Boral will receive a $500 billion payment on completion scheduled for January 2014, with potential for further payments.

Following this announcement both Perpetual and The Commonwealth Bank lifted their holdings to 8.26% and 8.59% of the vote, and the market reacted positively with a gap in the share-price to break the $5 resistance barrier.

This post is a personal appraisal of Boral Limited from a technical perspective and is not a recommendation to either buy or sell shares. It should not be taken in isolation and readers should seek advice from their usual financial adviser.

Long-Term picture from monthly chart above

Taking a low of $1.85 in December 2000, and a high of $10.15 reached in May 2006, Fibonacci retracement levels have been calculated,

The 61.8% Fibonacci level lies at about $5, whilst the key 50% retracement level is at about $6.

Boral’s share-price has been in a long-term down-trend since June 2006 no doubt much influenced by the global financial crisis.

After dipping below $3, the management embarked on a program of drastic re-structuring of the company’s complex operations. Shareholders were rewarded with an impulsive move of the share-price higher. Technically Speaking envisaged a target price of $5.40 by the end of March 2013, but the rise faltered after reaching a high of $5,28. The corrective move lower found support at $4 and has since been rebounding.

The long-tern trend-line was broken back in December 2012, but on the monthly chart the down-trend remains technically intact. It will be possible to pronounce a new uptrend if the share-price surpasses the previous high at $5.28.

Triangular trading range broken to the upside

Short-term outlook from daily chart above

The announcement referred to in the introduction created a spike in the both the share-price and the volume of shares traded.

Within 24 hours the price jumped from around $4.70 to reach a high of $5.15

Such a strong move suggests further price gains. With the breaking of the $5 resistance level, the expectation is for this level to now provide support for a second stage re-rating to about $5.50. The first move of about 80 cents was from $4.10 to $4.90. The next move is likely to be similar, ie from $4.70 to about $5.50.

With the 50% Fibonacci level at $6, my expectation would be for further gains to this level in the next 6-12 months.