close icon

Prepare to Leave Berkshire Hathaway

The last time we wrote about Berkshire Hathaway was just over a year ago – on November 9th, 2015 – in an article called “Berkshire Hathaway Not Giving Up Yet”. At the time of writing the class B stock was trading slightly above 136 dollars a share after e decline from $153. Despite the recent weakness, we thought the dip was a good chance to join the uptrend, which was soon expected to resume. Our bullish opinion was not based merely on extrapolation. It was the result of careful Elliott Wave analysis of the weekly chart of Berkshire Hathaway given below.
berkshire hathaway
As visible, the advance from $45 a share in 2009 was supposed to evolve into a five-wave impulse, since that is the pattern the market uses to progress while in a trend. Berkshire Hathaway’s wave (5) was still missing last November and therefore the stock was still expected to exceed the top of wave (3), once wave (4) ends. Knowing that this is the pattern the market was most likely to draw, we assumed buying the dip was a good strategy. Today is November 25th, 2016. It is also a good day to see how the company’s share price has been developing during the last 12 months.
berkshire-hathaway-25-11-16
Berkshire Hathaway Class B stock reached $159 this week. Yes, it initially fell to $123.46 in February, but did not even managed to touch the 38.2% Fibonacci level, not to speak the top of wave (1), so there was no reason to panic.
Now, “buy the dip” is a good strategy. The problem is it does not work forever. If it did, trading and investing would be child’s game. Unfortunately, every trend inevitable ends, which is why it is vital to know when NOT to buy the dip.
The Wave Principle postulates that every impulse is followed by a three-wave correction of similar degree in the opposite direction. In Berkshire’s case, wave (5) has already taken the stock above the top of wave (3), so chances are there is not much left of it. In addition, the relative strength index shows a strong bearish divergence between waves (3) and (5), thus further supporting the negative outlook.
Calling a top is risky business and we are not going to try it. In fact, it seems the bulls could still take the stock to $165-$170, but once they do, a major (A)-(B)-(C) decline is likely to begin. Even Buffett himself is not going to tell you that his company is immuned to the trials and tribulations of the market cycle. Because it is not. So, if this is the correct count, instead of celebrating the new all-time high and joining the bulls, investors would be better off to stay aside now. A decline back to the $120 area seems to be just around the corner.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Undervalued Bristol Myers Stock Can Still Get Cheaper

It’s been almost two years since we shared our bullish stance on Bristol Myers stock. Shares in the pharmaceutical major were changing hands for less than $46 in April, 2019. The company had just announced its planned acquisition of Celgene for about $74 billion and Wall Street apparently didn’t like the risks involved. However, the…

Read More »

DraftKings on the Verge of Another 40% Decline

It’s been almost three and a half months since we examined DraftKings stock in October, 2020. The share price was hovering near $57 after a strong run from $10.60 to over $64 in just several months. The regulatory environment in the U.S. seemed to be warming up and many analysts hurried to issue their BUY…

Read More »

AMN Healthcare Stock to Suffer a 2020-Like Drop

AMN Healthcare Services provides workforce and staffing solutions to healthcare facilities in the U.S. The company is relatively small with a market capitalization of less than $4 billion. However, small companies can make for excellent returns if one happens to identify the winners. And indeed, between late-2011 and early-2020, AMN stock from under $4 to…

Read More »

Zoetis Stock Getting Ahead of Itself, Invites Correction

Based in Parsippany, NJ, Zoetis Inc. is an animal medicine and vaccine developer and manufacturer. The company went public in 2013 and has been enjoying steady growth since. With the stock currently above $160 a share, Zoetis holds a market cap of nearly $80 billion. For a profitable and growing company like Zoetis, a rising…

Read More »

CBOE Stock Looking Good After a Record Year

CBOE Global Markets Inc. is an equities, options and futures exchange operator in the U.S. and Europe. The company traces its roots back to Chicago in 1973, when it practically invented options trading in its present form. CBOE is literally part of the very infrastructure of modern financial markets. So it is not surprising that…

Read More »

Novo Nordisk Bulls Have an Elliott Wave Problem

Novo Nordisk A/S is a Danish pharmaceuticals major with a market cap of over $160 billion. People need their medication even in recessions, so the company’s business wasn’t as affected by the 2020 crisis as most other industries. Novo Nordisk remains a top-notch pharma with consistent profits and revenue and no debt whatsoever. And the…

Read More »

Lockheed ‘s Correction Still Unfolding as Expected

Almost a year and a half ago, in July 2019, we wrote that Lockheed Martin is likely “setting the stage for an unpleasant surprise.” The stock had just reached a new all-time high and was trading at $370 a share. Optimism was in the air and analysts were more bullish than ever. An indeed, fundamentally,…

Read More »

More analyses