Warren Buffett’s favorite stocks among Japanese trading companies may be ready to take a breather after they surged to records amid a flurry of analyst upgrades, if technical market patterns are any guide.
Read: Buffett-Favored Japan Trading Firms Zoom Above Stock Targets
Here are three charts showing the momentum could slow:
The Relative Strength Index (RSI), which some traders monitor for signs of excessive moves, reached its highest since January 2018. The Topix Wholesale Trading Index is the top performer on the benchmark this year, gaining 42%.
Trading houses, which were once considered to be relatively cheap, are now trading at a price-to-book ratio (PBR) of about 1.3 times, the highest in 15 years. The ratio for the Topix Wholesale Index P/B relative to that of the broader Topix is also on the rise as trading houses announce share buybacks.
The surge has pushed Japan’s trading firms to a record relative to the broader Topix. The firms pulled ahead of tech companies last week as the best performing sector in the nation’s stock market this year.
