Buy Berkshire Hathaway Before it Breaks Out

After closing the largest deal in its history by acquiring railroad company Burlington Northern Santa Fe Corp. (BNI), Warren Buffett's Berkshire Hathaway completed a 50-to-1 stock split of its Class B shares on Jan. 21 to accommodate the deal.

And Tuesday came the announcement that Berkshire Hathaway (BRK.B) would replace BNI on S&P 500 Index (SPX), which will be one of the biggest additions to the benchmark index in years.

Due to its more than $3,400 per share price tag prior to the split, BRK.B had been excluded from the index because it didn't have enough trading volume to meet the index's standards. But the stock split resulted in shares priced in the $70 range, and more than 14 million shares change hands on the day of the split.

So, shares of Warren Buffett Inc. are now affordable for the average investor, but does that mean you want to go out and buy BRK.B now?

Well, if the charts are any indication (and they are), then the answer is an unequivocal yes!

Berkshire Hathaway (BRK.B) About to Take Off

The stock split was the catalyst for an upside breakout in BRK.B from a rectangle pattern.

An upside breakout is a bullish signal that occurs when the price of a financial instrument breaks out through the top of a trading range. This technical event indicates that prices will rise explosively over a period of days or weeks as an almost vertical uptrend appears.

But a lot depends on the duration of the trading range from which the breakout occurred, because this can provide an indication of the strength of the breakout. The longer the duration of the trading range, the more significant the breakout.

For BRK.B it took nearly six months to form, and six months is considered a long enough time for an explosive breakout. And after the stock broke out, it immediately filled the gap and did a back test of the pattern.

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Shine Up Your Portfolio With 3 Top Metal Stocks

As we enter 2010, metal commodities like platinum and palladium are hitting new 52-week highs and breaking out of new chart patterns. Oddly enough, gold is one metal that hasn't reached new 52-week highs in the new year, but if you're familiar with me, you know I think gold is the No. 1 sector to invest in for 2010. And many of the best gold stocks are making new highs even though the actual metal currently is not.

In short, this is going to be a huge year for metal commodities and metal stocks. Now I can't cover all the metal sectors in this update, but I want to highlight a few of the main ones for you, namely platinum, palladium and copper. What's more, after I review these sectors, I'm going to give you three of my top metal stocks. These are the names I think the big money is going to go after first -- and you want to get in before they do!

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A Second Chance to Trade One of 2009's Best IPOs

SolarWinds Inc. (SWI) may sound like an alternative energy company, but it actually makes application software. The company went public in May 2009, at $12.50, and has returned 84% since then, making in one of 2009's hottest IPO stocks.

Trading IPOs can be an exciting way to make huge profits. SWI is a great example of that. But it's also a great way to lose money. IPOs often trade erratically, and since the stock has no trading history, it is impossible to predict where it will trade next.

Sure, you could get lucky, like SWI investors did, but you could also be left holding the bag when the party is over if the stock heads south.

So, when trading IPOs, I like to wait until I can accurately predict their next move using technical analysis. This way I can time my entry and exit points to maximize my gains and get out before the party is over.

What is SWI's chart telling us right now? It's saying we are being offered a second chance to trade one of 2009's hottest IPOs.

SolarWinds Inc. (SWI) Trade

The stock has formed a cup-and-handle, a pattern similar in appearance to a coffee cup with a right-side handle, which indicates the potential for an uptrend.

This pattern is an elongated U-shape followed by a short period of consolidation of one to two weeks in duration, which tends to be downtrending. When the stock's price ascends outside of the trendlines, a breakout is likely to occur. If the price ascends beyond the upper right side of the cup, then the pattern is confirmed, particularly if it is accompanied with a sharp increase in volume.

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This Is Your Second Chance in the Gold Sector

Where will some of the biggest profits of the year come from?

Gold stocks. That's right, gold is the No. 1 sector to invest in for 2010.

Gold has risen for nine years straight -- not a single year of negative returns! Do you know of any other asset class that can make that claim? And this year will be no different.

So, while I'm sure there are plenty of you out there kicking yourself for missing the gold run in 2009, you can stop beating yourself up over it now. Because the profits to be had in this sector will blow last year away, especially if you invest in the following five gold stocks that I think will double (or better!) in 2010.

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My last update on gold, which I wrote toward the end of November, was titled "Why You Do NOT Want to Invest in Gold Now." At the time, I was bullish on gold long-term, but issued this warning because all of my charts, indicators and oscillators showed gold and gold stocks at extremely overbought levels.

Gold did sell off in December, managing to work off all those frothy levels, but we have now entered the second leg of the mega rally in gold that will last for all of 2010 and into 2011.

Keep in mind that this is my longer-term view on the sector, as opposed to my typical short- to medium-term updates, which you have seen throughout 2009.

Your Second Chance in the Gold Sector
If you missed the gold run in 2009, then do yourself a favor and join the party in 2010. Don't miss this next run up, because the profits to be had in this sector next year will blow 2009 away.

As I've stated before, gold has risen for nine straight years without a single year of negative returns. (Do you know of another asset class that can make that claim?) And next year will be no different. And gold is not, I repeat NOT, a U.S. dollar story. Gold isn't rising in the dollar alone. It's hitting new highs in every currency around the globe. And not all the world's currencies experienced a complete freefall like the greenback.

The daily chart of gold below shows a symmetrical triangle breakout and parabolic run up that I brought to your attention in August.

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A few weeks ago, as gold was making new all-time highs, I warned investors that it was not the opportune time to invest in gold stocks. I foresaw a correction, and I was right.

Gold sold off last week, in part due to better-than-expected unemployment data and the Fed saying it believed inflation will remain "subdued." And gold stocks followed the metal down.

Now, don't get me wrong. I am BULLISH on gold in the long term (and I think it's almost time to go long gold stocks again). But I didn't think you'd want to weather the pullback I saw coming.

That said, there was one gold stock that actually closed up on the week: Northern Dynasty Minerals Ltd. (NAK).

There's something to be said for a stock that hangs tough in a market as volatile as the gold sector and even outperforms the actual metal!

So while gold might see some more consolidation in the short term, NAK should hold up just fine.

In fact, it should do a lot more than just hold up, as it's about to break out of a bullish ascending triangle pattern.

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An IPO You'll Be Thankful For This Holiday Season

Lately, I've been talking a lot about the hot IPO market, and today I want to tell you about the next great IPO trade.

Talecris Biotherapeutics (TLCR), a biopharmaceutical company that specializes in plasma-derived protein therapies, went public on Sept. 30, raising a whopping $950 million.

In early November, the IPO received a slew of upgrades:

*Barclays Capital initiated "equal weight"
*Citigroup initiated a "buy"
*Wells Fargo initiated "outperform"
*JPMorgan initiated "overweight"
*Since it began trading, the stock's chart has formed a bullish cup-and-handle pattern.

The pattern includes an elongated U-shape followed by a short period of consolidation of one to two weeks in duration, which tends to be downtrending.

The pattern is similar in appearance to a coffee cup with a right-side handle, and indicates the potential for an uptrend.

If the price ascends outside of the trendlines, then it has the potential for breakout. If the price ascends beyond the upper right side of the cup, then the pattern is confirmed, particularly if it is accompanied by a sharp increase in volume.

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Satellite imagery provider DigitalGlobe (DGI), which went public in mid-May, was the fifth U.S. IPO in 2009, and is part of a larger and very exciting trend in the IPO market.

With Morgan Stanley (MS) and JPMorgan (JPM) as lead managers on the deal, the company raised $279 million by offering 14.7 million shares at $19, which was above the proposed $16 to $18 range.

DigitalGlobe is a leading global provider of high-resolution satellite imagery for defense and commercial applications, such as Google Maps. According to the company, "With advanced collection sources and a comprehensive ImageLibrary containing more than 730 million square kilometers of imagery and imagery products, DigitalGlobe offers a range of online and offline products and services designed to enable clients to access and integrate imagery seamlessly into business operations and applications."

That's a nice little niche, but if you're familiar with me, you know that I like to trade best-of-breed IPOs with in-demand products or services, using technical analysis as my guide. (If you're not familiar with my IPO trading strategy, I suggest you take a look.)

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Psychological resistance is a person's refusal to change their behavior directly or indirectly to a certain set of events triggered by a past circumstance in the market place that they refuse to discuss, remember, deal with or even think about. We call this resistance "pissed off supply". They sell simply because this is exactly where they bought weeks, months or years prior. For no other reason than that.

Technical resistance on the other hand is completely different because it's "rational behavior" done by far fewer market participants and in this update, I will explain why the 1,100 "psychological barrier" that I keep talking about will soon end as we get buyers around the 1070 level. In fact, that is the range of the market all week. Not a coincidence!

Video Update That Explains It All