After what was no doubt a wild weekend in Omaha, it seems only fitting to kick off the week looking at Berkshire Hathaway (BRK.A, BRK.B) shares. I am going to stick with the B shares, because, let's face it, chances are that more investors are trading the B shares than the A shares -- I know I am.
For now, Warren Buffett gets a pass into the bullish camp, but I will say up front that the long-term picture of Berkshire shares isn't without its challenges, but let's start with the short-term view. We can see price move above resistance on Friday going into the weekend's annual shareholder meeting. Berkshire had been stuck in a bearish price channel for two months but finally saw a close above resistance Friday and follow-through this morning. A close over $143.50 sets up a very nice reversal breakout.
Resistance around $142.50 now becomes support and anything below $140 puts us back into the bearish camp. Momentum and trend are both pushing bullish, and the series of higher lows in the Relative Strength Index finally seem to be taking hold in price. I wouldn't expect a ton of upside, but I'm looking for Berkshire shares to finish the summer north of $150 with $148 to $150 the short-term six-week target.
The challenges for the stock are clearer in the weekly chart, where a better picture of the importance of the $140 level emerges. A drop below $140 puts Berkshire into the short camp with a minimum target of $130; however, let's not get ahead of ourselves. Price is bouncing and for the worry $140 brings, it also brings opportunity. That price becomes a very clear stop from this $145 level, which means neither trader nor investor needs to risk a lot of capital to get exposure to Berkshire.
There are signs of a reversal, as we are seeing the RSI poke its head above 50, which led the big breakout in early 2014. Also, we may be seeing a turn higher in the price momentum oscillator (PMO). Look back at February 2014, when there was a bullish crossover in the PMO along with an RSI crossing over 50. This foretold happy times for bulls for the rest of the year. We may be on that precipice again. I imagine it would take another two weeks for the PMO cross to occur. My approach is to take a half-size position this morning and watch the action over the next two weeks before determining if I want to make this a long-term core position and just use it for a trade, win or lose.
