Shares of financial services firm Jefferies Financial Group Inc. (JEF) are up sharply Tuesday as traders and investors are jumping in to follow the coattails of Warren Buffett.
Buffett's Berkshire Hathaway (BRK.B) , (BRK.A) is reportedly taking a sizeable new stake in Jefferies.
Let's check out the charts and indicators.
In this daily bar chart of JEF, below, we can see that prices have made a powerful looking base pattern since March. Prices have made a potential inverse head-and-shoulders base pattern with a neckline around $35.
JEF has rallied above the now rising 50-day and 200-day moving average lines. In recent days prices have broken out over the neckline. The daily On-Balance-Volume (OBV) line made a low in May/June and a higher low in October. The Moving Average Convergence Divergence (MACD) oscillator gave a buy signal in October when it moved above the zero-line.
In this weekly Japanese candlestick chart of JEF, below, we can see a positive looking picture. Prices have made a bottom pattern and have rallied above the 40-week moving average line. The slope of the 40-week line is now positive. The weekly OBV line has moved sideways since last October and did not decline much when prices weakened. The MACD oscillator has crossed above the zero-line for a new outright buy message.
In this daily Point and Figure chart of JEF, below, we can see an upside price target in the $56 area.
In this weekly Point and Figure chart of JEF, below, we can see the same price target as the daily chart above - $56.
Bottom line strategy: The charts and indicators of JEF looked positive long before Warren Buffett took a big position. Traders could approach the long side of JEF on a pullback to the breakout point around $35. This is the best area to go long and to control the risk.
