Berkshire Hathaway Inc. (BRK.A, BRK.B) shares fell nearly 5.5% on Monday, which was more than the 4.2% drop in the S&P 500. After topping $300,000 per share in mid-December, Warren Buffett's iconic company lost $18,700 per share in value and fell to just over $295,000. Buffett noted on CNBC in early January that he felt stocks were not overvalued given the level of interest rates and the ramifications of the corporate tax cut haven't been fully realized.
As a value investor, Warren Buffett has always focused on making investments in companies at attractive valuations, which creates a margin of safety. This margin of safety could help pad the stock in the event of a significant market decline since value stocks tend to be punished less than growth stocks. That said, some analysts have suggested that the conglomerate has a stretched valuation following the significant rally in the stock market. (See also: How Warren Buffett Made Berkshire Hathaway.)
From a technical standpoint, the stock broke down from the pivot point and trendline support at $314,600, as well as S1 support and the 50-day moving average at $302,976, to the middle of its previous price channel. The relative strength index (RSI) fell near oversold conditions at 32.23, while the moving average convergence divergence (MACD) experienced a bearish crossover that could signal more downside ahead.
Traders should watch for a move lower to S2 and lower trendline support levels at $282,200 if the market experiences another major decline. Otherwise, the stock could consolidate within its price channel between the upper and lower trendlines before making another breakout attempt to retest highs of around $325,000. The next major support levels in the event of a bigger correction would be prior lows of around $275,000 and $260,000. (For more, see: Buffett, Bezos, Dimon to Found Healthcare Company.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.