Not all the names we're looking at are bullish setups -- Berkshire Hathaway (BRK.A) is starting to look "toppy" right now. And investors who own this name should take note.
Berkshire Hathaway has stomped the broad market's impressive performance this year, climbing almost 30% year-to-date. But Berkshire broke its uptrend on this latest correction, and it's currently in the late stages of forming a head and shoulders top: a bearish reversal pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head; the sell signal comes on the breakdown below the pattern's "neckline" level, which is right at $111 at the moment. A drop below that $111 level is the major sell signal for this stock.
Lest you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant."The case in point comes from the last name we're looking at today...
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