Austin Galt at TheVoodooAnalyst.com takes a technical look at the daily, weekly, and monthly charts of two powerhouse stocks and offers his suggestions as to the key areas to watch moving forward and what indicators are suggesting to him about future price action.
Berkshire Hathaway
Berkshire Hathaway, Inc. (BRK-A) is involved in many diverse businesses including insurance, freight rail transportation, utilities, and energy. It is listed on the New York Stock Exchange (NYSE) with a market capitalization of around $350billion. Price recently traded at $210,760.
BRK-A was covered in February 2015 with the expectation of one final marginal high. This did not occur so let's quickly revise things using the daily and monthly chart.
BRK-A Daily Chart
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I have drawn a horizontal line which denotes a previous double bottom. I thought this would lead to new highs but it wasn't to be and price breaking down below this level is very bearish in my opinion.
Also, I have drawn a green highlighted circle which denotes the first bear rally high. The first rally in a new bear rally often makes a deep retracement and this was certainly the case here with the high being just below the 88.6% Fibonacci retracement level.
Since then, price has been forming a pattern of lower lows (LL) and lower highs (LH). Price is now in the process of making a new lower low so things really don't look good for the bulls.
I have added moving averages with time periods of 50 (blue), 100 (red), and 200 (black). We can see there are bearish crossovers that have already occurred with the big one—that is the red line crossing below the black line—looking imminent.
The lower indicators, being the RSI, Stochastic, and MACD indicators are all looking terrible from a bullish perspective.
Let's now look at the monthly chart to reacquaint ourselves of the target levels for the bear trend to end.
BRK-A Monthly Chart
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The Stochastic and MACD indicators have both turned down and are looking bearish. And this is the monthly chart no less.
The Bollinger bands show price is now at the middle band. Will support come in here? Maybe temporarily but I wouldn't like to bet on it.
Where is the final pullback low likely to be?
There is no change to the outlook as shown in the February 2015 analysis. I have added Fibonacci retracement levels of the move up from March 2009 low to December 2014 high and I am targeting price to clip the 61.8% level which stands at $130911.
Also, I have drawn a horizontal line denoting the December 2007 high at $151650 and I expect price to dip a bit below as it gives this support level a thorough test.
Summing up, I believe a big correction is now at hand.
Disclosure: I have no financial interest in BRK-A.
NEXT PAGE: What About the Information Technology Company?
|pagebreak|International Business Machines
International Business Machines Corp. (IBM) is an information technology company and is listed on the New York Stock Exchange (NYSE) with a market capitalization around $165billion. Price recently traded at $166.99.
IBM was last analyzed in February 2015, and now that it looks as if the bear rally is over, let's revise things using the weekly and monthly charts.
IBM Weekly Chart
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The green highlighted circle shows the existence of a gap which has now been closed or near enough. The high side of the gap stands at $178.69 and price recently topped out at $176.30. That should be it.
We can see price has been trending down within the upper channel of the Andrew's Pitchfork. A pattern of lower lows and lower highs are evidence of this downtrend, which I expect to accelerate shortly into the lower pitchfork channel. The recent lower high was right at resistance from the upper channel line. Nice.
The PSAR indicator has a bearish bias after price recently busted the dots on the downside.
The Stochastic indicator is trending down and looking bearish while the MACD indicator has just made a bearish crossover.
IBM Monthly Chart
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The recent high was held by resistance given from the PSAR indicator denoted by the dots.
This recent high was also at resistance given from the middle Bollinger band. I expect price to now move back down to the lower band.
The RSI has been trending down and recently made a new low—which is bearish—while the MACD indicator has also been trending down and looks be threatening a bearish crossover, which should see new lows made soon enough.
As for where the final pullback low will be, I have added Fibonacci retracement levels of the move up from October 2002 low to March 2013 high and I am still targeting the 61.8% level at $115.85. Price may nudge a bit below this level.
I have drawn a Fibonacci Fan and I am looking for the low to be around support from the 76.4% angle which looks set to occur just under the 61.8% retracement level in late 2016.
Finally, I have drawn a horizontal line which denotes the July 1999 high at $139.19. This level may provide temporary support but I favor an even deeper correction.
Disclosure: I have no financial interest in IBM.
By Austin Galt at TheVoodooAnalyst.com
