Warren Buffett Shows His Technical Analyst Roots
- Posted by Greg Harmon
- on December 12th, 2012
How many investors made a comment today as Warren Buffett bought back over a billion dollars of his own company stock. Comments flew around like “is Warren out of ideas?” “What happened to UPS or Bank of America”. “Isn’t there a railroad out there that looks cheap?” Well the astute technical analyst saw the move as a great play. Take a look at the daily chart of the smaller B shares below. The stock has been trending higher with steady rising support since December last
year. Notice that every pullback through the 50 day Simple Moving Average (SMA) has quickly been bought. It seems Warren may have jumped the gun here by a day or two but we can cut him some slack, he is getting a bit up there in age. The trend also shows strength to continue with the Relative Strength Index (RSI) bullish and growing and the Moving Average Convergence Divergence indicator (MACD) positive. In fact the break higher from the bull flag carries a Measured move higher to 91.98, a new multi-year high. But we know that Warren has been
investing for a long time and has a longer time horizon that next month. So perhaps he is looking at the AB=CD pattern in the weekly chart above. After a 50% retrace of the move off of the March 2009 low the Potential Reversal Zone (PRZ) does not show up until 108.96 in late September 2013. Plenty of room and time for the buy back to payoff.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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