The Daily Breakdown takes a closer look at Warren Buffett’s Berkshire Hathaway, which has pulled back to a potential key support area.
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Tuesday’s TLDR
- VIX picks up steam
- BRK.B dips to potential support
- AMD shines
What’s Happening
Stocks took a “risk-off” vibe into the weekend as tensions flared in the Middle East, but resolved higher on Monday as investors made their way back into markets. The S&P 500 rallied almost 1%, while the Nasdaq 100 jumped 1.4%.
Now though, stocks are back under pressure this morning, albeit to a lesser extent.
After dropping back down into the 16 to 17 range, the VIX — Wall Street’s so-called “fear gauge” — jumped to as high as 22 on Friday and has consistently stayed around or above 20 since then. As a general rule of thumb, a VIX above 20 can create a more volatile trading environment.
That doesn’t mean stocks are set to tumble. But it is a reminder that if the VIX stays above 20, we could have a few bumps and bruises along the way.
As for today, let’s see if the S&P 500 can stay above 6,000. For the SPY ETF, that means staying above $600.
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The Setup — Berkshire Hathaway
While Berkshire Hathaway stock eventually got dragged down by the volatility in early April, shares cruised to record highs amid the tariff turmoil as investors hopped aboard Warren Buffett’s flagship firm looking for safety.
Although BRK.B snapped back to a fresh all-time high in early May, the stock has been quietly retreating over the last six months. Now down about 10% from its highs, Berkshire is at an interesting area:
The stock’s decline lands it right in the $480 to $490 zone, which was notable resistance in Q3 and Q4. Further, the stock is approaching its 200-day moving average, which has been support so far this year.
If support again holds, bulls will look for a rebound back to the upside. If Berkshire really gains momentum, bulls might start looking for a retest of the highs. However, if support fails, BRK could lose even more altitude, potentially retesting its April low near $460.
Options
One downside to BRK.B is its share price. Because the stock price is so high, the options prices are high, too. This can make it difficult for investors to approach these companies with options.
In that case, many traders may opt to just trade a few shares of the common stock — and that’s fine. However, one alternative is spreads.
Call spreads and put spreads allow traders to take options trades with a much lower premium than buying the calls outright. In these cases, the maximum risk is the premium paid.
Options aren’t for everyone — especially in these scenarios — but spreads make them more accessible. For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street Is Watching
Amazon will run its annual Prime Day for four days this year, from July 8th through the 11th. It’s the first time the event will run for that long, as the company tries to boost mid-year revenue and increase its Prime memberships. AMZN stock recently hit a multi-month high. Check out the charts.
AMD had one of its best days in the past year, climbing almost 9%. The rally follows positive analyst commentary about AMD after the company’s “Advancing AI” presentation last week. Following the event, there’s also speculation about a potential collaboration with Amazon Web Services. For more analyst coverage, check out the research page for AMD.
Shares of Meta climbed almost 3% on Monday after announcing plans to introduce ads on WhatsApp. Meta purchased WhatsApp in 2014 for roughly $20 billion, and even though its base has swelled to nearly 3 billion users, WhatsApp largely remains an untapped revenue source for the company.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.