Warren Buffett's Berkshire Stock Flashes Strong Warning
This article first appeared on GuruFocus.
Berkshire Hathaway (NYSE:BRK.B) stock has climbed to a fresh all-time high, but an increasingly stretched technical indicator is raising questions about how much further the rally can run. The Warren Buffett (Trades, Portfolio)-built conglomerate has gained more than 9% from its October lows, pushing its relative strength index (RSI) to its highest level in more than two years and putting investors on alert for a potential pullback.
Berkshire operates a sprawling collection of businesses spanning insurance, railroads, utilities, manufacturing, and retail, alongside a substantial investment portfolio.
Shares reached a record $549.96 on October 22, marking a 9.3% advance from their October 1 low of $495.96.
The rally has been particularly striking because of the speed at which buying momentum has accelerated.
Berkshire’s RSI, a widely followed gauge of market momentum, surged to 81.30 last Thursday, its highest reading since September 2024, before easing to 73.54.
Typically, an RSI above 70 indicates overbought conditions, while readings exceeding 80 can signal an unusually extended rally.
That doesn’t necessarily mean a correction is imminent. However, it suggests investors may have pushed share prices higher faster than underlying momentum can sustainably support.
Adding to the bullish picture, Berkshire trades above its 20-day, 50-day, 100-day, and 200-day moving averages, indicating strength across multiple timeframes.
What investors should watch next
For Berkshire shareholders, the immediate test is whether the stock can break decisively above $549.96 or retreat toward its shorter-term moving averages.
Beyond technical indicators, the company’s upcoming third-quarter earnings, expected in early November, could provide a more meaningful catalyst.
Berkshire reported $12.98 billion in second-quarter operating earnings, up roughly 16% from a year earlier, alongside approximately $4.5 billion in quarterly share repurchases.
Investors should monitor insurance underwriting profitability, investment income, and additional buybacks to assess whether fundamentals support the latest rally.
Ultimately, an elevated RSI signals potential short-term vulnerability, not necessarily a deterioration in Berkshire’s long-term investment case.