Buffett's Berkshire Hathaway could be headed for its next major breakout, according to the charts

Published Thu, Jan 18 202412:29 PM ESTUpdated Thu, Jan 18 202412:37 PM EST

Berkshire Hathaway isn't part of the Magnificent 7, but considering that the stock has been in an uptrend for the last few decades , maybe it deserves another look. Berkshire has displayed bullish technical characteristics throughout its storied history: It has routinely made higher lows, constructed bullish chart patterns, broken out, made new all-time highs and extended after breaking out. This is best viewed on its monthly chart that goes back to 1996. (We are using the more retail-friendly and cheaper 'B' shares for our analysis.) From this perspective, BRK.B has had five major breakouts through 2021. As we can clearly see, some of the bullish patterns took years to form, but the stock has come back each time. More importantly, each comeback has reclaimed a former high point and continued higher. This is especially good to know now given that the stock still is trying to extend beyond its former 2022 and 2023 high points, which could be "major breakout number six." The last few breakout attempts in late 2023 failed to attract enough interested buyers to push beyond the $360-$370 zone. But with the stock still in an uptrend from the October'22 lows, that area remains in the crosshairs. Once BRK.B regains its footing, we'll be looking for new highs and then some. While past performance is no guarantee of future returns, patterns within long-term trends tend to repeat themselves in some form or another. Zooming in to the daily chart (below), BRK.B has been trading within an upward sloping channel lately, making higher highs and higher lows since bottoming last fall. For the stock to make a run at the September'23 all-time high in the near-term, we'll need to see demand return relatively soon. If that doesn't happen, then respecting the rising 200-day moving average would be the next best thing. That's currently near $345. Relative strength BRK.B also has displayed strong periods of relative strength vs. the financial sector. We can see this by the BRK.B/XLF relative line trending higher for over 20 years now. ('XLF' is the Financial Select SPDR tracking the financial sector in the S & P 500.) This has been the case both when interest rates were declining through 2020 and since then - as the 10-Year Yield has risen from nearly zero to 5% just a few months ago. In other words, the stock can give investors exposure to the financial sector without having to endure the same risk to rising rates as banks. BRK.B last pushed to a new high vs. the S & P 500 in late 2018, but that breakout didn't hold. It's since outperformed the index from the summer of 2020 and now has returned to a resistance zone that dates all the way back to 2008. Thus, if/when the stock does make another new all-time high, it very well could be breaking above a 16-year trading range relative to the S & P 500, as well. -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: (None) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.