UBS and Crédit Suisse are trading Neck to Neck

7 years ago - Published by SAMT in Expert opinion, Finance, Technical Analysis

The two big banks are yet again trading neck to neck. Indeed, both their share prices have been oscillating slightly below the CHF 16 mark for more than two months (between 15 and 16 for UBS and 14 and 16 for Crédit Suisse). Crédit Suisse lags a bit following the sharp fall it saw in early 2016, yet its higher beta of 1.57 (1.07 for UBS) has enabled it to catch up most of this underperformance. We expect more ring-fencing between the two over the next few months.

 

In line with the banking sector, which since December has been consolidating along with rates at high levels, UBS and Crédit Suisse have probably reached an intermediate low point (see both our oscillator series: i.e. upper and lower rectangles for both the UBS and Crédit Suisse charts). We believe both could resume their uptrends during the month of April and possibly retest their recent highs. Following that however, we would see them correct into May, probably towards mid June.

 

UBS – Daily chart or the perspective over the next 2 to 3 months:

 

The potential upside targets, we can currently calculate on UBS would imply that the next move up could reach a zone between CHF 17.7 and 19.5, or 1.3X to 1.7X our historical volatility measure (delta = 4.48) added to the lowest point of the chart (11.9). The correction that should follow into June, could lead UBS back down towards a target zone between 14 and 15 (right hand scale).

Crédit Suisse – Daily chart or the perspective over the next 2 to 3 months:

 

The potential upside targets, we can currently calculate on Crédit Suisse would imply that the next move up could reach a zone between CHF 16.4 and 18.4, or 1.3X to 1.7X our historical volatility measure (delta = 5.09) added to the lowest point of the chart (9.915). The correction that should follow into June, could lead Crédit Suisse back down towards a target zone between 12 and 14 (right hand scale).

Hence considering current levels (16 for UBS and 15 for Crédit Suisse), the upside potential for both stocks over the next few weeks is similar. That said, Crédit Suisse, because of its higher beta, may represent more risk if the retracement we expect into June comes to materialize.

 

Note : this article was written prior to the latest weekend announcement that more than 50’000 Crédit Suisse accounts were being investigated for tax evasion in The Netherlands, the UK and France. Crédit Suisse may hence sell off on the news when Markets open on Monday 3rd April. Yet, if we believe our analysis above, it should make a comeback over the next few weeks, before moving lower gain in May/June.

 

For the rest of the year, on our Weekly charts (not shown here), we see the two banks resuming their uptrend during H2 2017. This positive scenario and the higher beta of Crédit Suisse should allow it to outperform UBS and even overtake it in terms of price per share. The two banks should first meet important resistance towards a zone between CHF 19 and 20 a share, yet following that should move higher towards an estimated target of CHF 26 for Crédit Suisse and CHF 23 for UBS.

 

 

Jean-Francois Owczarczak CFTe – SAMT Assistant Vice President – Geneva Chapter – jfo@samt-org.ch

 

Disclaimer: the above article is for general information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.